Shariah Guidelines for Trading and Investment in Stocks

These guidelines outline the Shariah principles governing investment in and trading of shares in joint stock companies.

Companies are categorized into three types based on their objectives, activities, and the nature of their stock dealings:

• Type One: Permissible Companies: Investment and trading in stocks of these companies are allowed if their objectives and activities comply with Sharia principles and the specified trading conditions.
• Type Two: Prohibited Companies: Investment and trading are strictly prohibited for companies involved in illicit activities such as trading in wine, tobacco, pork, gambling, interest-based banking activities, illicit media, interest-bearing bonds, or those primarily involved in debt-related businesses.
• Type Three: Conditionally Permissible Companies: These companies have permissible core activities but may be partially involved in prohibited dealings, such as usurious loans or interest-based deposits.

Investment in the stocks of these companies is allowed under the following conditions:

• Investment should be limited to necessity. Preference should be given to companies that avoid usurious dealings if they meet the required criteria.
• Interest-bearing loans must not exceed % 33 of the company’s total market value of assets. If the company’s market value drops below its book value, any borrowing is deemed impermissible regardless of amount.
• Earnings from prohibited activities must not exceed % 5 of the company’s total earnings. This includes income from interest, illicit sources, or undisclosed activities.
• Any suspicious or unclear earnings must be thoroughly investigated

• If the conditions of a Type Three company change such that the above controls no longer apply, its stocks must be sold as soon as possible, ideally within 90 days of confirming the change.
• 
  The company's activities and the allocated percentages for entry permits in investment and trading are reflected in the most recent financial statements issued for that purpose—whether annual, quarterly, or monthly—and regardless of whether they are audited or unaudited.

• It is not permissible to participate in the establishment of companies whose objectives or activities involve illicit transactions.
• Investors must dispose of any illicit components associated with the companies.