Shariah Compliance

Shariah Board

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Mufti Asadullah Qasmi

Sharia Board Member

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Mufti Ibrahim Essa

Sharia Board Member

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Mufti Mohammad Yahya Qasmi

Sharia Board Member

Halal Investing

For most Muslims, the concept of Halal and Haram is often associated with food. However, Islam teaches that these principles must extend to every part of life – including finance, savings and investments. As the global Muslim population grows, so does the demand for Halal investing as per Islamic principles, especially in the stock market. But many Muslims still wonder: Is the stock market Halal or Haram? Is option trading Halal in Islam? Can Muslims invest in shares? The answer lies in understanding the core of Halal investing principles, which are derived from the Holy Quran and Sunnah, and other sources of the Sharia or Islamic Law. These principles ensure that income through Halal investments such as Halal shares must avoid riba (interest), gharar (excessive uncertainty), and Haram sectors like gambling, alcohol, and conventional banking.

‍Halal is a word in the Sharia which means lawful and permissible. Halal investing is simply investing according to the guidance found in Islam. This guidance is derived from the primary sources of Islam, the revealed word of Allah, the Qur’an, and the teachings and guidance from the final Prophet, Prophet Muhammad ﷺ. (pbuh)

For Muslims, ensuring all income is Halal is a religious obligation. Islamic finance & investment principles as derived from the Holy Quran and other sources of the Sharia place huge importance on ensuring that one’s income is Halal while promoting ethics, justice and mutual benefit in contrast to conventional finance’s focus on interest and speculation, where making money is the ultimate aim regardless of social consequences and where one party benefits at the expense of others as most of the investments are in speculative contracts such as options & derivatives which are nothing but zero sum games. Ibn Taymiyyah (d. 728AH/1328CE) states:

“Sharia was revealed to establish and perfect that which is beneficial and to prevent and eliminate that which is harmful.” [Fatawa ibn Taymiyyah]

This makes adopting Halal investments in India an ethically sound and religiously compliant alternative for Muslims seeking to grow their wealth by investing in Sharia-compliant stocks and Halal mutual funds. In fact, Halal investing shares strong similarities with other alternative investment frameworks such a ESG, socially responsible investing, and impact investing – but go a step further by being rooted in divine law. To invest ethically, Muslim investors must understand how different financial instruments work. For example, many scholars agree that trading options is not Halal due to the speculative nature of derivatives. This raises important questions like: Is online commodity trading Halal? Is it Halal to trade in F&O? etc.

At Zamzam Capital, we help answer these questions through clear guidance and our focus of only investing in Halal stocks through our stock plans and model portfolios that are all vetted through our robust Sharia screening framework, thereby allowing Muslim investors to remain true to their faith while enjoying long-term financial benefits. Halal investing is not just about profit—it’s about purity, ethics, and accountability. And with the right knowledge and guidance, it is entirely possible to grow your wealth ethically without compromising your values.

7 Key Principles

Halal investing is guided by seven foundational principles derived from Sharia law, designed to help Muslims determine whether a particular investment is Halal or Haram. These rules form the backbone of our Halal Stocks List that we put together under the supervision of our Sharia Board and help us define what makes an investment Sharia compliant. Investors who follow these principles can confidently participate in the share market, knowing their investments are fully Halal and Sharia compliant.

These seven key principles for identifying Halal investments are as follows:

All forms of interest-based income are strictly prohibited. Therefore, companies whose stocks are Halal will not earn or pay interest in significant amounts.

Investments must be made only in companies that do not engage in Haram or unethical industries such as gambling, alcohol, pork, tobacco, pornography, conventional financial services, movies or weapons manufacturing. This forms the basis for the first criteria in our Halal stock Sharia screening framework.

Halal investments excludes excessive uncertainty or risk, speculation, deceit and uncertain contracts. Transactions should be transparent, and all parties must have a clear and unambiguous understanding of the terms and conditions of the investment. Sharia-compliant investments thus avoid products like derivatives or contracts with unclear outcomes.

Instruments like options, futures, derivatives, swaps, CDOs, and CFDs are considered Haram due to their inherent speculative nature and resemblance to gambling.

Halal investments are prohibited from providing guaranteed returns or principal protection (capital guarantee). All investments carry an element of risk and reward, and that is essential to maintain Islamic investing ethics. Investing in Halal stocks by their nature do not offer principal protection and are thus an ideal asset for Halal investments.

Halal investments must result in full ownership and constructive possession to the investor for the asset or share invested in, for the returns to be permissible. Thus short selling and intraday trading are not considered Halal trades and are impermissible.

Returns from Halal investments can only be forecasted or expected but must not be fixed or guaranteed as there will always be an element of risk that can lead to a loss or lower than forecasted returns. Any return must be based on actual performance and subject to market risk.

Conclusion

In today’s complex financial landscape, Halal investing stands out as more than a religious obligation – it is a comprehensive, values-driven approach to wealth creation. By focusing on ethics, fairness, and real economic value, Sharia-compliant investing offers a powerful alternative to conventional finance.

For Muslims, the question “Is stock market Halal?” is central. At Zamzam Capital, we provide clarity through our thoroughly vetted Halal Stocks List, helping investors confidently engage in Halal shares in the Indian market without compromising on their faith. Our curated list of Halal stocks in India empowers individuals to invest in sectors aligned with Islamic principles, free from interest, speculation, and unethical industries. Whether you are seeking answers to complicated questions related to Halal investments like “Is option trading Halal in Islam?” or “Do we need to clean capital gains as well as dividends to purify our investments?”, Zamzam Capital is your trusted guide in making informed decisions when it comes to Sharia compliant investments in the stock market.

Our mission is simple: to make Halal investments in India accessible, transparent, reliable and financially rewarding by promoting Halal shares as a viable asset class. Whether you are a Muslim aiming to align your investments with your faith, or a non-Muslim investor seeking a moral compass for your financial choices, Halal investing provides a robust, ethical path to financial growth and wealth creation. Ultimately, Halal trading is proof that faith and finance can go hand in hand. You don’t have to choose between profits and principles. With Sharia-compliant stocks, you can grow your wealth in a manner that is pure, ethical, and pleasing to God Almighty.

Shariah Screening Criteria

Given the varying interpretations of what qualifies as a Halal stock? it is essential to follow a clear and authoritative framework for identifying Sharia-compliant stocks in India. At Zamzam Capital, our Sharia Board decided that our Sharia stock screening process will be based on the robust criteria developed by Mufti Muhammad Taqi Usmani (DB) – a leading global authority in Islamic banking & finance and one of the foremost Islamic scholars in the present age.

We follow this exact methodology in screening stocks listed in the Indian stock markets to create our widely followed, transparent and dependable Halal Stocks List. This criteria are further endorsed by leading Islamic seminaries in India through formal fatawa, including:

  • Darul Uloom Deoband (Deoband, India)
  • Mazahir Uloom (Saharanpur, India)
  • Darul Uloom Nadwatul Ulama (Lucknow, India)
  • Imarat Sharia (Patna, India)

We apply the following 6-point Sharia-compliance screening criteria for determining our Halal List of Sharia compliant stocks in India:

Core business of the company being invested in must be Halal and in line with the dictates of Shari’a. Hence, investment in securities of any company dealing in conventional banking & finance, conventional insurance, alcoholic drinks, tobacco, pork and other non-halal food products, gambling/gaming, music, movie production, selling of gold & silver jewelry on deferred basis, advertising, arms manufacturing, cloning and pornography or related activities is not permissible.
Note: In cases where the above the non-permissible business activities or sectors constitute less than 5% of total revenue of a company (this is known as the 5% rule) then such companies shall not be excluded from the Halal List.

Core business of the company being invested in must be Halal and in line with the dictates of Shari’a. Hence, investment in securities of any company dealing in conventional banking & finance, conventional insurance, alcoholic drinks, tobacco, pork and other non-halal food products, gambling/gaming, music, movie production, selling of gold & silver jewelry on deferred basis, advertising, arms manufacturing, cloning and pornography or related activities is not permissible.
Note: In cases where the above the non-permissible business activities or sectors constitute less than 5% of total revenue of a company (this is known as the 5% rule) then such companies shall not be excluded from the Halal List.

Debt to Total Assets ratio should be less than 33%. Debt, in this case, is classified as any interest bearing debts including conventional lease liabilities. Zero coupon bonds and preference shares are, both, by definition, part of debt.
Note: We use an even lower threshold of 33% Debt vs. 37% Debt used in the referenced Screening Criteria in the above ratio as per the guidelines of our Shari’a Board given that the Indian market just considering the NSE gives a large number of Shari’a compliant shares and thus a lower threshold of 33% is the correct ratio to be used for the Indian market.

The ratio of Non-compliant Investments to Total Assets should be less than 33%. Investment in any Non-compliant security shall be included for the calculation of this ratio.

The ratio of Non-compliant Income to Total Revenue should be less than 5%. Total Revenue includes Gross Revenue plus any other Income earned by the company. 
Note: Non-compliant Income below the above threshold should be purified by removing the relevant proportion from received dividends and donating the same to charity.

The ratio of Non-Liquid Assets to Total Assets should be at least 20%. Non-Liquid Assets, here are defined as any asset that Shari’a permits to be traded at a value other than its par value.

The Market Capitalization should be greater than the Net Liquid Assets calculated as: Total Assets – Non Liquid Assets – Current Liabilities.