Stocks
Is buying stocks halal?
Read our methodology and editorial policy.
Summary
Buying shares in publicly listed companies is permissible when the company's business activity is halal and its financial ratios (debt, interest income, illiquid assets) pass standard shariah screens.
The reasoning
Owning shares is treated as part-ownership of the underlying business (musharaka-like). When the business itself is halal and only incidentally exposed to interest, scholars permit ownership with purification of the impermissible portion.
The AAOIFI screening standard (and the Dow Jones Islamic Market Index methodology designed by Sheikh Yusuf DeLorenzo) sets three commonly used thresholds: interest-bearing debt / market cap < 33%, interest income < 5% of revenue, cash + interest-bearing securities / market cap < 33%.
Companies that fail the business screen (alcohol, gambling, conventional banks, adult entertainment, pork) are impermissible regardless of financial ratios.
Conditions for permissibility
- Primary business activity is halal
- Debt-to-market-cap ratio below ~33%
- Non-permissible income below ~5% — and that portion is purified (given as charity)
Scholar citations
"Permissible with screening per DJIM methodology"
"Permissible with AAOIFI screening + income purification"
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