INCOME PURIFICATION METHODOLOGY FOR SHARIAH-COMPLIANT STOCKS (ISRA-TR REPORT 2017)

 1036
Year: 2017


Among modern corporations, it is barely possible to find a company whose business activities or sources of income are purely Shariah-compliant. In view of this, the majority of Shariah scholars have allowed for investing in the stocks of companies which have mixed — permissible (halal) and impermissible (haram) — activities and income, provided that their primary business activities are permissible and the peripheral source of impermissible income activities such as interest-based transaction, sale of pork or alcohol, gambling, etc., does not exceed tolerable bench- marks. Accordingly, if a company passes the selected Shariah screening criteria, the scholars consider the equity of such companies as Shariah-compliant for investment. Nevertheless, the income generated from the impermissible activities of these companies, even though they are on the Shariah-compliant list, requires special treatment, known as cleansing or purification. Purification refers to the process of identifying, separating and channeling the impermissible income of the stocks to charity. The process of purification is different, based on different scenarios of Shariah non-compliance of stocks. The objective of this article is to shed light on the income purification methodology of stocks based on those different scenarios. The main issues in this regard are to identify what needs to be purified and how it is purified. This article discusses such issues from a Shariah perspective. 

 

Source:

ISRA THOMSON REUTERS ISLAMIC COMMERCIAL LAW REPORT 2017 (Pg 66 - 69)


 

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