Fatwa: # 15303
Category: Business Matters
Country: South Africa
Date: 1st June 2007

Title

Fraters Islamic Equity

Question

I am interesting in investing moneies in Fraters Islamic Equity which has launched in 2005.This fund is managed by reliable Ulama. the monthly debit orders is R500-00 a month.?Can I  invest or you can advise me?

Answer

In the name of Allah, Most Gracious, Most Merciful  

Assalaamu `alaykum waRahmatullahi Wabarakatoh

The issue of dealing with equity funds and shares has been discussed extensively with the proponents of such funds. We shall be presenting our correspondences to the business data soon. In brief, we were not presented with any sound academic proof in favour of investing in equity funds.

The most contentious issue is on the share holder being an owner of the assets of the company. We have supported out contention with much proofs even from the circular field in that regard. In Shariah, a person cannot be regarded shareholder of a company if he does not own a share of the assets of the company prorata his contribution. The question is what is he paying for? What does he own? What will be the dividends be in lieu of?

In the absence of a bonafide transaction in Shariah, the surplus is regarded as surplus in lieu of money. That is clear riba. It is therefore not permissible to invest in any conventional shares.

And Allah knows best

 

Mufti Ebrahim Desai
Darul Iftaa

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