In a forum on muslim-investor.com, a Muslim investor asks an Islamic scholar if it is halal, or permissible, to profit from an investment that nearly doubled in a short period of time after the company was acquired by a Japanese firm.
It’s an easy call for most investors but the scholar weighs the issue and eventually concludes that taking profit is halal in that particular case because the investor originally saw value in the first company and there was no intent to speculate on the direction of the market.
Generally, under Islamic law profit may be taken to the extent that the normal course of the market will allow. A stock price cannot be inflated through artificial means, exploitation of advantages or monopolies. Margins cannot be so high as to be “detrimental” to the welfare of society.
“It all comes down to intention,” says Jaafer Syed, senior financial consultant at Oakville, Ont.-based W.H. Stuart & Associates. Mr. Syed provides investment services for nearly 500 Muslim Canadians across Canada. “Not everything is black and white,” he says.