Islamic Capital Market? a Halal Paradigm.....

Halal Capital Market Paradigm:                                                             

Any activity be one is a stock, trade, manufacturing or service in view of Halal gain or income generation, shall be in total compliance with the integrated Divine principles of Shari’ah and that is;  law, morality and cooperation with utmost care, share and concern with holistic universal character for the common benefit of all humanity by waiving the issue of one’s religion, race, colour, gender, status or nationality. An unfair gain through dishonesty, misappropriation, oppression, illegality and appreciating advantage at the expense of others, is totally opposed by the concept and spirit of Halal.

Money managements involving usury and gambling, manufacturing and / or  selling of forbidden products (for example, liquor, pork and pornography related materials), engaging in operations evolved by  the elements of uncertainty and cheating, are forbidden by the Shari’ah. These activities are considered as un-Islamic (non-Halal) in nature, as regulated by the Shari’ah frameworks. Thus, neither capital market, stock market nor other related money matters are also governed by the Shari’ah principles with no exception per se.  Therefore, the stocks and shares of companies involving in the above-mentioned practices are deemed non-halal. But, what if the core business of a company is halal in nature, while a smaller portion of the business activities are not align with the Shari’ah principles. Can such a company or its activities be regarded Halal? Or is it Halal to invest or participate in the above nature of companies or their activities? Or what are the Shari’ah screening mechanisms to determine one is Halal?

Muslims cannot afford to ignore the capital market because the private sector, which holds a nation’s power are made up of entities that are naturally controlled by the shareholders, and ignoring the capital market implies ignoring the economic power of private sector and its attendant power of wealth creation, employment and training opportunities, control of economic knowledge and technology, and global economic relations.

The global Shari’ah compliant movement and strategies attempted to develop Islamic capital markets to cater for the demands from local as well as foreign investors who seek to invest in securities based on Shari’ah principles. The Kuala Lumpur Stock Exchange Shari’ah Index (KLSE SI) and the Dow Jones Islamic Market Indexes are examples of such attempt. However, there remain issues on stock trading practises in which Islamic scholars are still not unanimous as to the validity of such practises. Examples are the contra and margin trading and options on stocks. Despite the ongoing debates, in Malaysia, the Islamic scholars do permit these practices, but with some modifications (for example replacing interest-based elements with Mudarabah principles) to meet the terms of Shari’ah principles.

With the foreseeable future of globalisation, Muslims should take advantage of the potential benefits arising from the involvement in capital markets; this is to prevent the Muslims from being left behind to the non-Muslims. However, it should be in the mind of the Muslim investors that whatever actions or activities they partake in the capital market, they must be in accordance with the guidelines and rules stated under the Shari’ah principles.