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Can Muslim Investors Buy Shares

With the country buzzing about the Safaricom initial public offer, many Muslims will be interested in putting some funds into the blue chip company.

Safaricom is a tempting proposition, which cannot be shunned away easily. However, as with all other temptations dealt with on day-to-day basis, it is imperative that Sharia requirements are given due consideration.

What, therefore, is the stand of Sharia on investing in the shares of joint stock companies? Is investing in stock markets lawful? This article aims to clarify Islam’s stand on investment in shares and the Sharia backings that currently drive the practice.

First, it is worth noting that Islam as a deen (way of life) is distinguished by its relevance to all facets of life, including financial undertakings. These are not only meritorious but in many cases regarded as obligatory.

The Quran is explicit in its advocacy of all forms of legitimate commerce through dozens of verses, such as Chapter 2:275 which reads, “Allah has permitted trade…”

Similarly, financial investment is given relevance by the Prophet as can be seen, for instance, from the Hadith of Amru bin Shuaib related from his grandfather that the Messenger of Allah said: “Whoever is entrusted with the money of an orphan should trade with it and should not leave it sitting to be used up by zakat” (Tirmidhi).

The Messenger (PBUH) urged the trustee on the estate of people who due to age (or other reasons) cannot manage their own financial affairs, to invest it in a business that will yield a return and make it grow until they are in a position to do so themselves. For, if proper investment is not made with such funds, the same will be depleted by zakat (obligatory annual charity), thus leaving the orphan with little or nothing.

Notwithstanding these exhortations to investment, Muslims also are required to put the tenets of their faith into practice in all their business transactions and to stay within the juristic parameters set for all activities.

Even though the format of joint stock companies has no parallel in Sharia, most Muslim jurists agree that the overall legal structure of these institutions can be regarded compatible with the law. This is so because the purchaser of a share in a joint stock company actually acquires an equity stake, which means that, as a shareholder, the investor is a partner in the business.

As a partner, the investor’s equity is exposed to risk such that he actually shares in either the profits or the losses of the company. This, therefore, equates to the Islamic concept of musharaka (partnership) and is regarded acceptable.

However, whether Muslims can invest in present day stock market companies has been a matter of debate between Sharia experts for several years in the past largely for issues relating to the following matters:

What line of business is the company engaged in and can its business activity (or activities) be regarded acceptable from a Sharia point of view? Does the company earn income from non-halal (impermissible) activities?

Does the company earn interest income from its cash surpluses or from other sources? Does it borrow money on interest basis? What percentage of the company’s assets is in cash (liquid) form and/or in debt form?

Lawful business

We will turn to the details underlying these issues shortly. However, what is obvious is that if the main business of a company is not lawful from a Sharia perspective, a Muslim may not purchase its shares.

Similarly, scholars are almost unanimous that if a company is engaged in lawful business, does not borrow money on interest and does not keep its surpluses in an interest bearing account, dealing only in limited cash holdings and receivables, then its shares can be purchased, held and sold without any hindrance.

Such companies, however, are very rare in contemporary stock markets. Almost all companies quoted in present day markets are, in some way, involved in activities that violate the injunctions of Sharia. Indeed, the typical joint stock corporation both pays and receives interest.

Most companies are at least partially capitalised with debt and pay interest to their creditors, who hold bonds or other liabilities. Companies also typically receive interest on cash which they hold in banks or from other market investments. A company may also charge its customers penalty interest on any overdue accounts receivable.

In view of this, some Sharia experts say it is not allowed for a Muslim to deal in the shares of such companies, even if its main business is halal.

However, a large number of contemporary scholars do not endorse this conservative view, arguing that limited amounts of interest earnings or a few acts of borrowing should not render the whole business of the company as haram.

Many contemporary Muslim jurists say that dealings in the shares of joint stock companies can be acceptable provided a host of conditions are satisfied:

he business

The main business (or businesses) of the company should not violate Sharia. Industry sectors that don’t manufacture or market forbidden products are generally considered halal, acceptable for Muslim investors. They include chemical manufacturers, computers and computer software, energy, telecommunications, textiles, transportation, agricultural production and automobiles.

When considering such companies, however, it is important to study the company’s revenue and what portion of it may be earned from impermissible activities.

Companies considered haram, whose shares cannot be acquired or traded include: those engaged in interest-based financial products such as conventional banks, insurance companies and companies engaged in conventional hire purchase or factoring businesses; companies that manufacture, sell or distribute liquor, narcotics and so on; companies engaged in the production, manufacture, sale or distribution of pork or other non-halal meat products; companies involved in or supporting gambling, night club activities, pornography, prostitution and so on.

A number of other businesses, such as those that harm the environment, have poor track records with regard to labour or developing countries, or produce and market tobacco or weapons have also been deemed as unacceptable by a cross-section of Muslim scholars.

Financial screens

Once a company’s activities are confirmed as acceptable, scholars have outlined the following set of financial screens:

i) What is the level of income generated from non-halal activities? If a company earns some income from non-halal activities, it should not exceed five per cent of the company’s total income. If it does, then it is not permissible to invest in that company.

ii) What is the level of interest income generated by the company? Sharia scholars permit investment in companies whose income from interest forms less than five per cent of total income. It is worth noting that even when the financials abide by this limit, a purification of earnings received from such companies must be undertaken through charity. For example, if four per cent of the company’s income arises from interest-bearing deposits, then four per cent of the dividend received by a Muslim investor must be given away in charity.

iii) What is the level of interest-bearing debt that the company owes? The company’s interest bearing debt should not exceed a third of its market capitalisation.

This can be calculated as Total Debt divided by Trailing 12-Month Average Market Capitalisation (where Total Debt = Short-Term Debt + Current Portion of Long-Term Debt + Long-Term Debt).

iv) What is the level of cash and receivables (including interest bearing securities) in the company’s balance sheet? According to a consensus Sharia view, both cash and receivables (deyn) cannot be traded at a premium or even at a discount and can only pass hands by way of assignment at par.

Company’s total asset

Hence, scholars are of the view that the level of cash and receivables (including interest bearing securities) should be a maximum of 49 per cent of the company’s total asset base.

Notwithstanding the above criteria, various other matters need consideration:

a) The computation of the ratios should be based on the company’s most recent (and preferably audited) financial information.

b) Constant monitoring of the company’s subsequent financial behaviour is required to ensure that it remains within the given thresholds. This assumes constant availability of financial information about the company.

c) Analysis of the company’s financials should be undertaken by a competent person.

Sharia, through the Quran, the Sunna and Ijtihad, is deemed to continue providing solutions to the dynamic needs of Muslim societies. This is exemplified by the interpretational efforts undertaken by learned scholars and jurists in the past few years to come up with guidelines to identify what may be regarded as permissible stocks in dealing with listed joint stock companies.

However, it should be remembered that the matter under discussion is extremely sensitive and is subjected to continuous scrutiny and change by the scholars in the light of new insights. Hence, these opinions should not be taken as “divine rules” of Sharia compliance.

Finally, two other issues relating to investing in shares are worth considering:

a) Investible funds must be from a halal source. Hence, a Muslim investor cannot borrow on interest to finance the purchase of shares.

b) Also, unlike conventional investors, Muslims are generally discouraged from acquiring stocks specifically for the purpose of short-term speculative trading. All purchases of shares should be for medium or long term investment.

source : http://allafrica.com/stories/200803311983.html

More Halal Fast Food In Britain

It’s spicy and ubiquitous, with around 1,700 shops in the UK, and a new chain set to give KFC a run for its money. Who, asks Anita Pati, is eating all the fried chicken? Tennessee, Maryland, Mississippi and Dixie in Peckham, Rotherham, Dewsbury and Hackney. An estimated 1,700 fried chicken joints, with their white, red and blue regalia, currently line UK high streets, tiny bones scattered over the pavements outside. Given their ubiquity, you would think the market has reached saturation point. Not so, according to Zack Kollias, international director of Texas Chicken. For him, the UK offers one of the world’s biggest markets for the food. His US-based firm, with more than 1,600 branches worldwide, has just launched here. Known as Church’s in the States, Texas has aggressive plans for growth in the UK - so far there are six branches, but by the end of April, Kollias hopes to increase this to 25, hitting 50 by the end of the year. “We’re coming to the UK because it’s a fantastic fried-chicken market and there really is no strong number-two player to KFC [formerly Kentucky Fried Chicken],” says Kollias. “There’s probably more than 1,000 individual chicken shops aside from KFC so clearly the market is accepting the chicken product.”

Originally a slave dish, breaded or floured chicken made its way on to American plantation-owners’ plates when African slaves started working as cooks. Fried in hot fat with thyme, garlic, paprika and bay leaf, and often served with sweet potato, as a substitute for the African yam, the dish became a staple southern American food. From soul food to fast food, fried chicken outlets steadily proliferated through such chains as KFC, which, by 1960 could boast 400 franchise units across the US and Canada. But what has made fried chicken so popular in the UK? Could it be the irresistibly bubbly, amber coating? That satisfying slide of teeth in oily flesh? Both food industry experts and regular chicken-bar diners generally agree that it is down to price, ability to fill you up, portability - and flavour.Despite increasing numbers of consumers shunning mass-produced chicken, spurred on by Hugh Fearnley-Whittingstall and Jamie Oliver’s Chicken Out! campaign, the cheap chicken market is steadily growing in the UK. So far, branches of Texas Chicken have opened in London’s Holloway and Walthamstow, Bolton and Birmingham, all places with high working-class and black and minority ethnic populations.

The Texas Chicken marketing campaign features images of a black family and a group of teenage boys wearing hoodies and baseball caps. When it launched, the chain also targeted minority ethnic media, such as Eastern Eye, Ethnic Now and Asian Lite. “[Black and Asian] communities prefer spicy chicken, that’s why we run both original and spicy so we can appeal to everyone,” says Kollias. The spicy variety, marinaded in black and cayenne peppers, is already selling four times better than the plainer, “original” counterpart. Both halal and spicy are also among the company’s biggest global sellers, Kollias points out.

The increasing number of halal fried chicken shops in the UK is testament to changing demographic and eating patterns. “The Muslim community here is growing,” says Enam Ali, chair of the Guild of Bangladeshi Restaurateurs. “Fried chicken is cheap - [people who eat it] are young, students, with limited pocket money.” Masood Khawaja, president of the Halal Food Authority, says, “A great percentage of third generation Muslims are not eating the original cuisine of their families - they want more takeaways, more convenience foods.”

Meanwhile, research company Mintel has found that the heaviest users of chicken bars are younger, less affluent consumers mainly from the D and C socioeconomic groups.

Not everyone is happy with how the high street is changing. Tottenham MP David Lammy, who used to work in a branch of KFC, has linked chicken joints with the “poverty of ambition in our inner cities” that do not allow black neighbourhoods to prosper. “When I walk down Seven Sisters Road [in London’s Tottenham], I don’t see dozens of distinctive restaurants or boutiques showcasing the best our community has to offer. Instead I see an endless stream of burger bars and fried-chicken shops, flogging cheap calories to the schoolkids and office workers,” he has said.

“Let’s just grasp the nettle here,” says black comic Paul Ricketts, whose stand-up observations often turn to this issue. “All black areas have loads of fried chicken outlets. It is a socio-economic thing. Chicken is one of the cheapest birds you can get. When people go on about smelly food, what they really mean is fried chicken, and they’re having a dig at the people eating it - we have an era where we don’t mention class any more, we just call them chavs or hoodies - it’s a term for working-class scum.”

People all over the country find fried chicken delicious. I don’t normally eat fried chicken - the batter is often too soggy and fatty - but I find the spicy version of Texas Chicken surprisingly tasty and I could be tempted to go back for more.

At Halal Southern Fried Chicken in London’s Brick Lane, they lace their hot wing batter with chilli powder, turmeric, cumin and coriander. Most customers are men in their 20s. The story is the same further down the road at Al-Badar Fried Chicken and Curry Restaurant, where their hot wings are coated in cinnamon, coriander and fresh and crushed chillies. Manager Amer Salim differentiates his product from the nearby KFC, which, he says, caters to another market. “In London’s Tower Hamlets, the Bangladeshi community like spicy with more and more chilli,” he says. “Fried chicken in KFC is not spicy.” Meanwhile, Shelly, 25, is enjoying chicken and chips with her brother and her 15-month-old son in a KFC in Hackney. “I just like the flavouring - spicy with herbs,” she says. Her 12-year-old brother Lerick says he loves the hot wings “because they’re spicy”.

At Caribbean takeaway Soulfood Shack in London’s Islington, co-owner Ivor Caesar says he sells halal meat, but not just for religious reasons. “It’s because people see halal as safer and healthier as they drain all the blood from the chicken.” They are about to start selling spicy fried chicken along with their jerk and barbecue wings at their customers’ requests. “Fried chicken, it’s like soul food,” says Caesar, who is from Jamaica. “When you come into a West Indian shop, you expect to see fried chicken. It’s a home thing, it’s a black thing.” But this will be “nothing like KFC or commercialised fried chicken”, he says. “Our chicken will be real, home-cooked chicken, Caribbean-style, marinated overnight in the natural way.” This means using pimentos, Scotch bonnet peppers, black pepper, sweet peppers, flour, spring onions and garlic, fried in an open deep-fat fryer so it’s crispy.

Tomorrow he will eat fried chicken with baked macaroni at his mum’s for Sunday lunch. “Fried chicken, man, it’s part of our culture, trust me.”

source : http://lifeandhealth.guardian.co.uk/food/story/0,,2268045,00.html

Assalaamu Alaikum, as awareness of Halal practices and concerns become widespread and more affluent, muslims are seeking halal products in diversified needs in everyday life. In today’s article, it is another finding that Muslims are creating their own demand and finding means to supply them as well. Read on.

Halal skincare launched

By Elham Asaad Buaras

source: http://www.muslimnews.co.uk/paper/index.php?article=3202

A new ‘halal’ skincare brand has been launched to cater for the needs of British Muslims.
Halo Skincare was founded by Soni Zuberi Shah, who saw a gap in the market for halal beauty products in the UK. Shah, a science graduate from Oxford University, worked alongside United Kingdom skincare experts to exacting European Union regulations and the highest halal specifications, to formulate the high quality Halo moisturising cream.
“I set out to create a product with ingredients that are halal and tayyab (permissible and wholesome). As Muslim consumers living in the UK, we no longer have to compromise our faith or principles for branded quality skincare,” said Shah.
Shah said they work closely with the independent regulatory authority, Halal Monitoring Committee UK, in screening all ingredients used and auditing the production process itself.
According to Shah, manufacturers have avoided harsh chemicals. Halo Light Moisturising cream does not have synthetic fragrances, artificial colourings or any unnecessary synthetic additives.