Section IV: Charity on Shares, Bonds, and Deeds
Firstly: Charity on Shares
1. Defining a share
Sahm linguistically: It is a person’s portion or share based on chance.
Sahm terminologically: It is a part of a company’s capital.
A person who holds a share in a company is considered to own a portion of it. The overall portion he owns of the company depends on the number of shares he holds in it and the company’s total number of shares. A shareholder may sell his share at any time, and he is liable to profit or loss depending on the company’s financial performance.
2. Ruling of company shares:
It is permissible in essence to hold shares in a company, as long as the company does not deal in haram transactions. This is the choice of Ibn `Uthaymin, al-Qaradawi, the decision of the International Islamic Fiqh Academy in Jeddah, and the decision of the Permanent Committee.
3. Haram shares
It is not permissible to hold shares in a company that runs haram transactions and dealings, like alcohol companies, tobacco companies, banks that deal with interest, and this is the decision of the International Islamic Fiqh Academy.
4. Mixed shares:
It is haram to hold shares in companies that are of a mixed state. That is, their dealings are in origin mubah, but they mix it with haram transactions such as usurious interest, usurious loans, and invalid contracts. This is the decision of the International Islamic Fiqh Academy in Jeddah, the International Islamic Fiqh Academy part of the Muslim World League, and the Permanent Committee.
5. Method of paying charity on traded shares:
Whoever buys and sells shares evaluates the worth of the shares he owns at the end of a calendar year then pays 2.5% of that amount. This is the decision of the International Islamic Fiqh Academy in Jeddah, the Kuwaiti Zakat House, [868] The Zakat House added two matters: Firstly: that whatever the company has paid in charity is determined in the total amount. Secondly: that the extra is added on it from the market value if it is more than what the company paid on it. the Permanent Committee, chosen by Ibn Baz and Ibn `Uthaymin.
6. Method of paying charity on invested shares:
Whoever purchased shares solely to invest them pays charity on their profit only. This is the decision of the Permanent Committee, the choice of Ibn Baz, Ibn `Uthaymin, al-Qaradawi, and the Islamic Fiqh Academy as part of the Organisation of Islamic Cooperation.
7. Paying charity twice:
Paying charity is not wajib twice: upon the shareholder and the company. Meaning, if the company pays charity on its capital, the shareholder does not also pay legal charity on his invested shares. If the company does not pay charity however, then he must pay charity on it. This is explicitly mentioned by Ibn `Uthaymin, al-Qaradawi, and the Islamic Fiqh Academy as part of the Organisation of Islamic Cooperation.
Secondly: Charity on bonds
- Defining bonds:
Sanad linguistically: It is anything relied upon, like a wall or its like.
Sanad terminologically: It is a financial means given to its holder from the bank, a company, or the government, for varying but specified periods of ownership, and it carries interest that is paid annually or every six months. [869] A sanad describes a relationship between a lender and a loaned of some monetary amount, the later contractually promising the former that he shall return said amount over an agreed upon period of time in instalments. The instalments include a charge on the service, which is usurious as it is an increase on the original loaned amount. The contractor – the lender – pays less than the bonds value in order to receive more than its worth with interest added on. The bond may be in either the name of the contractor or the contracted – the loaned party, and both types may be bought or sold. It may be sold for its actual value, in which case the seller only gains interest as profit, or less than its actual value, in which case there is a real and incremental profit.
- Ruling of bonds:
It is haram to deal with bonds. This is the position of the International Islamic Fiqh Academy in Jeddah, modern legal charity symposiums, the financial market symposium held by the Islamic Frontline, and the verdict of the Permanent Committee.
- Charity on bonds:
Charity is wajib in the bond’s origin only. As for the interest, it must be disposed of. This is the verdict of the permanent Committee, [870] In a question directed to the permanent Committee about bonds bought at a particular price for a particular period for a specified amount prior to purchase, the reply was: “It is not permissible to buy or sell the aforementioned bonds, as it is a usurious transaction, and usury is haram by textual evidence and consensus of the Muslims.” Permanent Committee Verdicts – First Collection (353/14) and the decision of modern legal charity symposiums.
Thirdly: Charity on deeds
- Defining deeds:
Sukuk linguistically: It is the plural of sakk, which means “book” in Arabised Persian. It is what is written out of contractual agreement. Provision used to be referred to as sukuk as it used to be prescribed in written form.
Sukuk terminologically: It is a financial investment transaction that is established upon dividends of invested assets each of which is a deed, the sum of which equals the total capital. The names of their owners are stated in the deeds, considering that they are owners of the dividend of the invested capital. [871] From their definitions, too, is that they are “documents of equal value representing known dividends in the ownership of individuals, services, a project’s assets, or investment activity. This is after determining the value of the deeds and closing the door of written contracting and using them for the purpose they were created for.” Accounting and Auditing Organization for Islamic Financial Institutions, Legal Standards, 2017, Band 2 from Leal Standard no. 17.
- Ruling on deeds:
It is permissible to buy and sell deeds, and this is the decision of the International Islamic Fiqh Academy in Jeddah. Charity on deeds
Charity is wajib in deeds and the profits made from them, and this is the decision of modern legal charity symposiums.
feqhia
