Is Amazon Stock Halal to Invest in? Facts you should know:: 9th October 2023

Business sector screening:

We have conducted a comprehensive review on Amazon.com, Inc from a Shariah point of view and analyzed its sources of income to know whether they are complying with Shariah principles.

Amazon seeks to be Earth’s most customer-centric company. In each of their segments, they serve their primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. They serve consumers through our online and physical stores and focus on selection, price, and convenience. They offer programs that enable sellers to grow their businesses, sell their products in their stores, and fulfill orders through them, and programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content. They serve developers and enterprises of all sizes through AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.

They also manufacture and sell electronic devices. In addition, they provide services, such as advertising to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising. Let’s have a look at the segments from which the company derives its operating revenue from and analyze it from Shariah’s point of view.

Let’s have a look at the operating segments from which the company derives its revenue from and apply Shariah screens on them:

Segment break up (In millions of USD)

For year ended 31st December 2022

Non permissible operating revenue (In millions of USD)

For year ended 31st December 2022

Area of Concern from Shariah Perspective:

As you can see in the first table, two of the business segments are engaged in non-permissible activities. Physical stores consist of non-permissible activities because its whole foods segment has sales from alcohol/pork/tobacco. The tricky area from Shariah’s point of view in this company is the revenue derived from the subscription services segment. The company has mentioned in the annual report that the subscription sales include fees associated with Amazon Prime members and access to content including digital video, audiobooks, digital music, e-books, and other non-AWS subscription services.

Subscription services comprise of two parts:

1. Access to faster delivery of goods. This seems to be permissible.
2. Access to entertainment content.  This however does not seems to be permissible even though not all the content offered on prime is non-permissible.

The question that was raised during the discussion with the Shariah board members was, do all users of Amazon prime subscription use the entertainment content service? Because the actual subscription fee is sold so that consumers can get faster delivery and special offers on e-commerce goods. Hence, this is the primary motive behind the revenue from subscription services and not getting access to digital content, although some consumers would. Upon reviewing this, the Shariah board concluded that in such cases where the revenue cannot be bifurcated into permissible and non-permissible revenue, the rule of 50-50 would be applied to this subscription revenue. Subscription services were $35.2 billion for the year, which accounts for 6.85% of the company’s revenue. This would make 3.425% of the 6.85% subscription revenue non-permissible, but within the allowed threshold of tolerance. With this rule applied, the Shariah Board concluded that Amazon Inc. would pass the business sector screening criteria.

Since the revenue from non-permissible income of operations is less than 5%, Amazon.com, Inc. passes the business sector screening criteria. Let’s have a look at the non-operating income of the company.

Non-operating Revenue: (In millions of USD)  

for year ended 31^st December 2022

It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the dividend purification.

Dividend Purification Calculation:

Financial Ratio Screen:

(All figures in millions of USD for the Quarter ended 30^th July 2023)

Source: All the above information is based on the website of the company and the latest Quarterly Report for the period ended 30^th July 2023.

Conclusion:

Given the above information, we at Islamicly believe that Amazon.com Inc. is a Shariah-compliant company as per the Shariah screening criteria.