Saturday 19 September 2020

Islamic Financing by way of Buying Shares

A translation of this fatwa from Naseem al-Sham

 

Question:

Assalām ʿalaykum,

I would like to finance some real estate in my home country of Jordan. I work in the Gulf and a representative of the Islamic Bank informed me that the bank does not buy real estate outside of its own country. He therefore suggested that he buy some shares on my behalf in some company and then sell them to me. Then I can sell them, get the necessary finance, go back to my country, and buy the real estate myself from the owner. Can you please give me the ruling for such a transaction? May Allah reward you with the best of rewards.

Answer (Imam Muḥammad Tawfīq Ramaḍān):

Wa ʿalaykum Assalām wa Raḥmatullāhi wa Barakātuh,

This transaction is called al-murābaḥah lil-āmir bi shirāʾ.[1] If the company whose shares he is buying is a company that adheres to the rulings of the Revealed Law, does not deal in usury and does not partake in unlawful transactions, then it is legitimate. The shares then represent portions of legitimate property, and thus it is valid to buy them and sell them, and Allah knows best.

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[1] (tn): i.e. an individual known as the āmir (i.e. the one commanding) asks someone else, the maʾmūr (i.e. the one commanded), to buy some merchandise for him with the promise that if he buys that merchandise, he will then buy it from him and allow him to make a specified profit from it.