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If I become a partial owner of a company via investment, i.e. I buy 100 shares in a company which gives me 1% ownership. If the company sells non haraam products, i.e. metal, but has a loan on which it is paying interest.

Would I as the 1% owner of the company via my 100 shares be directly or indirectly involved in interest? I ask this question because based on a fatwa, direct involvement in interest is haraam and indirect involvement in interest is not haraam.

I have seen another fatwa which I guess is referring to direct involvement in interest. That second fatwa includes the following hadith which seems to define the meaning of direct involvement in interest and gives 4 examples:

Muslim (1598) narrated that Jaabir (may Allaah be pleased with him) said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba, the one who pays it, the one who writes it down and the two who witness it, and he said: “They are all the same.”

From the above hadith, I have broken down the 4 examples of direct involvement in interest:

cursed the one who consumes riba
I personally don't think I will be directly consuming interest because of my 1% share. From an islamic view point, will I be considered to be involved in interest directly or indirectly because of my 100 shares?

cursed the one who pays it
I personally don't think I will be directly paying interest because of my 1% share. From an islamic view point, will I be considered to be involved in interest directly or indirectly because of my 100 shares?

cursed the one who writes it down
I will definitely not be writing down any invoices which include details on interest payments. That will be done by others in the company. From an islamic view point, will I be considered to be involved in interest directly or indirectly because of my 100 shares?

cursed the two who witness it
I will definitely not be witnessing the signing of invoices which include invoice payments, that will be witnessed by others in the company. From an islamic view point, will I be considered to be involved in interest directly or indirectly because of my 100 shares?

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up vote 2 down vote accepted

According to a fatwa by Sheikh Muhammed Salih Al-Munajjid. It seems that buying shares in companies which have taken out loans is not advisable.

Here is an extract from the mentioned fatwa:

Companies should also avoid using riba-based loans in order to set up production lines and factories; that should be achieved by using cash and the money of the shareholders.

So to sum up, if you want to invest in companies via shares, you need to ensure the company does not sell anything haraam, i.e. music, alcohol, interest based loans etc etc, and also, you need to make sure the company does not do anything unislamic, i.e. use interest based loans to pay off debts, buy machinery etc etc.

To make things even more complex, you need to make sure that the share holders money is not being used by the company to earn interest.

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