Sharia-Compliant Investing: Permissible and Prohibited Stocks
In recent years, the online trading market has been expanding rapidly, and the presence of traders from Muslim-majority countries has become increasingly visible. According to the Pew Research Center, the global Muslim population now exceeds 1.9 billion people, representing almost a quarter of the world’s total population. The highest concentrations of Muslims are found in the Middle East and North Africa (MENA), South Asia (including Pakistan, Bangladesh, and India), as well as Southeast Asia (Indonesia and Malaysia). The proportion of Muslims in Europe and the countries of the former USSR is also on the rise.
Against the backdrop of this growing interest from Islamic investors in global markets, a very practical question arises: which stocks are permissible to invest in under Sharia law, and which are prohibited? For example, the brokerage company XFINE offers its clients access to more than 1,000 shares of the world’s largest companies listed on leading stock exchanges – from New York and London to Tokyo and Hong Kong. However, the wider the choice, the harder it becomes to make the right decision, especially when it comes not only to financial returns but also to compliance with religious principles.
Sharia is not merely a set of restrictions but a comprehensive system of ethical and legal norms, which also govern financial transactions. Under Islamic jurisprudence, trading in securities is permitted only if certain conditions are met. First and foremost, the company’s business activities must be halal, meaning they must comply with Islamic values. Investors should avoid buying shares in companies involved in the production or sale of alcohol, gambling, tobacco products, pornography or other obscene content, as well as in conventional banking institutions that operate on an interest-based system (riba), since all of these activities contradict the fundamental principles of Sharia.
Even if a company operates in a “neutral” sector – such as technology, logistics, healthcare, or energy – a Muslim investor must also assess the company’s financial structure. For instance, if more than 33% of the company’s assets are financed through interest-bearing debt, or if a significant portion of its income comes from interest, such investments are considered undesirable. Special attention is given to the concept of “purification of income” – a Muslim who has received income from questionable sources is obliged to donate the corresponding portion to charity (sadaqah) without deriving personal benefit from it.
In practice, this means that not all high-profile names on the stock market are permissible under Sharia. For example, as XFINE notes, a Muslim is prohibited from investing in companies such as JP Morgan Chase or Bank of America, as they engage in conventional banking and earn income from interest. Alcohol producers such as Heineken or AB InBev, the world’s largest beer manufacturer, are also off-limits. Companies like Las Vegas Sands or Wynn Resorts, which specialise in gambling and adult entertainment, are prohibited as well. Other impermissible investments include tobacco giants like Philip Morris and military contractors such as Lockheed Martin, since Islam condemns participation in the production of offensive weapons. Even some media companies, including Netflix, may be prohibited due to their distribution of haram content.
Of course, not every private investor has the resources or expertise to conduct such thorough analysis independently. This is why specialised tools have emerged in the market, such as Islamic indices (for example, the Dow Jones Islamic Market Index or FTSE Shariah), Islamic ETFs, as well as platforms and applications that screen companies for Sharia compliance. Some Islamic investment funds also consult Sharia boards to ensure that their assets meet religious requirements.
In conclusion, Sharia-compliant investing is not a limitation but rather a way to trade consciously, combining sound capital management with ethical and spiritual values. For a Muslim trader, it is not only a path to profit but also a source of peace of mind, knowing that their investments do not support prohibited or harmful activities. And brokers like XFINE make this path easier and more transparent by providing convenient access to stocks and instruments that comply with Sharia principles.
