What is Islamic Finance?

Islamic finance refers to financial activities that comply with Islamic law (Shariah). This form of finance is based on ethical principles, promoting fairness, transparency, and social justice.

• Core Principles of Islamic Finance

The foundation of Islamic finance is built on core principles, including risk-sharing, asset-backed financing, and ethical investments. It emphasizes the importance of real economic activity, ensuring that investments contribute positively to society.

• Prohibition of Interest (Riba) and Speculation (Gharar)

One of the most significant tenets of Islamic finance is the prohibition of riba, or interest. Instead of earning money from interest, profit-sharing models are utilized. Additionally, gharar, which refers to excessive uncertainty or speculation, is also prohibited. This encourages stable and ethical financial practices.

• Ethical and Socially Responsible Investments

Investments in Islamic finance must align with ethical standards. This means avoiding industries like alcohol, gambling, and pork production. By promoting socially responsible investments, Islamic finance aims to support businesses that contribute positively to society.

What Are Halal ETFs?

Halal ETFs, or Halal Exchange-Traded Funds, are investment funds designed to comply with Islamic law. These funds offer a way for investors to engage with the stock market while adhering to Shariah principles.

Understanding ETFs (Exchange-Traded Funds)

ETFs are investment funds that hold a collection of assets, such as stocks or bonds. They trade on stock exchanges, similar to individual stocks, providing liquidity and diversification to investors.

How Halal ETFs Differ from Conventional ETFs

Halal ETFs are specifically screened to ensure compliance with Shariah law. Unlike conventional ETFs, which may include companies involved in prohibited activities, Halal ETFs exclude these investments. This makes them a suitable option for Muslim investors seeking to align their portfolios with their values.

Benefits of Investing in Halal ETFs

Investing in Halal ETFs offers several advantages. These include diversification, lower expense ratios compared to mutual funds, and the ability to trade like stocks. Furthermore, Halal ETFs enable investors to support ethical businesses, fostering positive social impact.

Types of Halal ETFs

Halal ETFs come in various forms, catering to different investment strategies and preferences.

1. Equity-Based Halal ETFs

Equity-based Halal ETFs primarily invest in stocks of companies that meet Shariah compliance. These funds provide exposure to various sectors while ensuring that the underlying companies adhere to ethical guidelines.

2. Sukuk-Based ETFs (Islamic Bonds)

Sukuk are Islamic financial certificates similar to bonds. Sukuk-based ETFs invest in these instruments, offering a fixed income alternative that complies with Islamic law. This provides investors with a way to earn returns without violating Shariah principles.

3. Diversified and Thematic Halal ETFs

Some Halal ETFs focus on specific themes or sectors, such as technology or healthcare. Diversified ETFs provide broad market exposure, while thematic ETFs allow investors to target specific trends. Both options cater to varying investment preferences while maintaining Shariah compliance.

How to Choose the Right Halal ETF

Selecting the right Halal ETF requires careful consideration of several factors.

• Evaluating Shariah Compliance

The foremost criterion is ensuring the ETF is Shariah compliant. Investors should look for funds with a clear Shariah screening process and advisory board to validate their compliance.

• Expense Ratios and Fund Performance

Analyzing expense ratios is crucial, as lower fees can enhance overall returns. Additionally, assessing historical performance helps gauge the fund’s effectiveness and risk.

• Sector Exposure and Diversification

Investors should consider the sectors represented in the ETF. A well-diversified fund can mitigate risks associated with individual industries. Ensure that the ETF aligns with your investment goals and risk tolerance.

Halal ETFs vs. Mutual Funds: Key Differences

Understanding the differences between Halal ETFs and mutual funds can help investors make informed choices.

Flexibility and Liquidity

Halal ETFs offer greater flexibility, allowing investors to buy and sell throughout the trading day. In contrast, mutual funds are priced at the end of the trading day, limiting trading opportunities.

Cost Considerations

Generally, Halal ETFs have lower expense ratios than mutual funds, making them more cost-effective for long-term investors. This difference in cost can significantly impact overall investment returns.

Conclusion: The Future of Halal ETFs and Islamic Finance

The future of Halal ETFs and Islamic finance looks promising. As awareness of Shariah-compliant investing grows, more financial products are emerging to meet the needs of Muslim investors. This trend is fostering a more inclusive financial landscape, encouraging ethical investing while providing diverse options for investors.

Investing in Halal ETFs opens up new opportunities for ethical and responsible investment while adhering to Islamic principles. As the market continues to evolve, more investors are likely to explore these avenues, paving the way for a brighter future in Islamic finance.

Frequently Asked Questions (FAQs)

Is it halal to invest in ETFs

Yes, it is halal to invest in ETFs, provided that they comply with Shariah principles. Halal ETFs are specifically designed to meet these criteria, ensuring that investments align with Islamic law.

What are the best Shariah compliant ETFs?

The best Shariah compliant ETFs can vary based on individual investment goals and preferences. Researching funds that emphasize strong Shariah compliance and historical performance is essential. Consider factors such as sector exposure and expense ratios to identify the best options for your portfolio.

The post A Beginner’s Guide to Halal ETFs and Islamic Finance first appeared on Islamicly.

The permissibility of intraday trading in Islam depends on how it is conducted. If the trading involves halal assets, avoids speculation (gharar), and does not include riba (interest), it can be permissible. In summary, intraday trading can be halal if:

• The assets are halal and ethically traded
• The trader avoids speculative behavior
• The transactions align with Islamic financial principles

However, if these conditions are not met, it is considered haram.

To understand how intraday trading aligns with Islamic principles, let’s explore the fundamentals of intraday trading and the core principles of Islamic finance, and how they relate to trading.

What is Intraday Trading?

Intraday trading refers to the practice of buying and selling financial instruments within the same trading day. Traders engage in this strategy to capitalize on short-term price movements, often executing multiple trades throughout the day.

How Does Intraday Trading Work?

In intraday trading, investors open and close positions in a single day. Traders analyze market trends, using various tools and indicators to identify potential opportunities. The goal is to make profits from small price fluctuations. Since positions are not held overnight, traders avoid the risks associated with overnight market movements.

Key Features of Intraday Trading

• Quick Transactions: Trades are executed rapidly, often within seconds or minutes.
• Leverage: Many traders use margin accounts to amplify potential returns, although this comes with higher risk.
• Technical Analysis: Intraday traders rely heavily on charts and technical indicators to make informed decisions.
• Market Volatility: Successful intraday trading requires capitalizing on volatile market conditions.

Principles of Halal and Haram in Financial Transactions

Understanding whether intraday trading is halal (permissible) or haram (forbidden) requires a grasp of the core principles of Islamic finance.

The Core Islamic Finance Rules

Islamic finance is governed by Shariah law, which emphasizes fairness, transparency, and ethical conduct. The two primary prohibitions are:

• Riba (Interest): Any form of interest or excessive profit-making is forbidden.
• Gharar (Uncertainty): Transactions involving excessive uncertainty or speculation are also not allowed.

Key Concepts to Keep in Mind for Halal Trading

When evaluating whether intraday trading is halal, consider the following concepts:

1. Asset-Backed Transactions: Investments should be tied to real economic activity or tangible assets.
2. Avoiding Speculation: Trading should not be purely speculative; rather, it should be based on informed decision-making and analysis.
3. Ethical Considerations: Investments should be in companies and sectors that comply with Islamic ethics, avoiding industries like alcohol, gambling, and unethical businesses.

Perspectives on Intraday Trading as per Shariah Rules

The views on intraday trading vary among scholars and Islamic finance experts. Some argue that intraday trading, especially if done with the intent of speculation, falls under the category of haram due to the high levels of uncertainty and risk involved. Others maintain that if conducted ethically and within the framework of Islamic finance, intraday trading can be permissible.

Key Considerations:

• Nature of the Investment: If the underlying assets are halal and the trading is conducted ethically, it may be seen as permissible.
• Intent and Purpose: The trader’s intention is crucial; if the purpose is to engage in gambling-like behavior, it leans towards haram.

How to Ensure Shariah Compliance in Intraday Trading

Ensuring that your intraday trading practices are Shariah-compliant involves a few important steps.

Islamic Financial Institutions and Intraday Trading

Many Islamic financial institutions provide services specifically tailored for Shariah-compliant trading. These institutions often offer accounts that do not involve riba and provide access to halal investment opportunities. Engaging with these institutions can ensure that your trading practices align with Islamic principles.

How the Islamicly App Can Help

The Islamicly app is a valuable resource for Muslim traders seeking to ensure their investments comply with Shariah law. It provides tools to analyze the Shariah compliance of stocks, ETFs, and other financial instruments. The app can help traders make informed decisions by providing:

• Shariah Compliance Scores: Evaluate companies based on their adherence to Islamic principles.
• Alerts and Insights: Get notifications about significant market movements and insights on halal investment opportunities.
• Portfolio Tracking: Monitor the performance of your halal investments in real-time.

Conclusion

Intraday trading remains a contentious topic within the realm of Islamic finance. While some aspects may align with Shariah principles, the speculative nature and rapid transactions inherent to intraday trading raise concerns among scholars. For those interested in pursuing this avenue, it is essential to conduct thorough research, seek guidance from Islamic financial experts, and leverage resources like the Islamicly app to ensure compliance with Islamic law. By maintaining ethical practices and making informed decisions, traders can navigate the complexities of intraday trading while adhering to their faith.

Frequently Asked Questions (FAQs)

Can I use leverage in Islamic trading?

Using leverage in Islamic trading is a complex issue. Many Islamic scholars argue that leverage can lead to excessive risk and uncertainty, which could make it haram. However, some Islamic financial institutions offer leverage options that are structured to avoid interest. Always consult with a knowledgeable scholar or advisor before using leverage.

Is short-selling allowed in Islam?

Short-selling is generally viewed as problematic in Islamic finance because it involves selling an asset you do not own and can be associated with excessive speculation. Most scholars classify it as haram due to its speculative nature and potential for unjust profit. Engaging in short-selling may not align with the principles of fairness and ethical conduct in Islamic finance.

Which type of trading is halal in Islam?

Halal trading focuses on ethical, asset-backed investments that avoid riba and gharar. Strategies such as investing in halal stocks, ETFs, and other securities that comply with Islamic principles are generally considered permissible. Long-term investing with a focus on tangible assets, as opposed to short-term speculative trading, is more in line with Islamic finance teachings.

The post Is Intraday Trading Halal or Haram? Islamic Insights first appeared on Islamicly.

Report Published as on 2nd August 2024

We have conducted a comprehensive review on Adani Ports and Special Economic Zone Limited from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.

Adani Ports and Special Economic Zone Limited is an Indian multinational port operator and logistics company, part of Adani Group. APSEZ is India’s largest Private Port Operator that operates a network of 13 ports and terminals across India’s east and west coast. They also offer integrated logistics services beyond just port operations. This includes warehousing, transportation, and other value-added services for their clients. It manages India’s first port-based Special Economic Zone at Mundra, Gujarat.

The Group’s Port Operations include Cargo Handling, Berthing, Storage, and other Value-Added Services like cargo stuffing and de-stuffing, customs clearance assistance, and stevedoring. Logistics Services include Warehousing, Inland Transportation, and other services such as freight forwarding, customs brokerage, and supply chain management solutions. As far as the operation of Special Economic Zones, APSEZ leases land within their SEZ to companies setting up manufacturing or trading units. This generates rental income along with various support services within the SEZ, such as power supply, water supply, waste management, and security, for which they charge fees.

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

Operating Revenue: (In INR Crores)

for the  year ended 31^std March 2024

Segment Breakup

Income from Port Operations:

As mentioned above, Port operations include Cargo Handling, Berthing, Storage, and other Value-Added Services like cargo stuffing and de-stuffing, customs clearance assistance, and stevedoring.

Aircraft Operations:

Karnavati Aviation Private Limited, a 100% subsidiary of APSEZL, is engaged in providing non-scheduled (passenger) airline services through its aircrafts.

Logistics Services:

As mentioned before, include Warehousing, Inland Transportation, and other services such as freight forwarding, customs brokerage, and supply chain management solutions.

Lease, Upfront Premium and Deferred Infrastructure Income:

No Income

Tricky Areas From a Shariah Perspective

A key concern voiced by Shariah compliant users is that su

Based on the above information, it is safe to assume that the business operations of Adani Ports and Special Economic Zone Ltd, would be Shariah Compliant.

Let’s have a look at the non-operating income of the company.

Non – Operating Revenue: (In INR Crores)

for the  year ended 31^std March 2024

It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant and other non compliant financial income. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen: 

(All figures in INR Crores for the Quarter ended 30^th September 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 September 2023.

Conclusion

Given the above information, we at Islamicly believe that Adani Ports and Special Economic Zone Ltd is a Shariah Compliant company as per the Shariah screening criteria.

The post Is Adani Ports and SEZ Ltd Stock Halal To Invest In? first appeared on Islamicly.

Report Published as on 2nd August 2024

We have conducted a comprehensive review on Eicher Motors Limited from a Shariah point of view and analyzed its sources of income to know whether they are complying with Shariah principles.

Eicher Motors Limited is a prominent Indian automotive manufacturer known for its diverse range of products, primarily in the commercial vehicle and motorcycle segments. Established in 1982 and headquartered in Gurugram, India, the company is renowned for its flagship brands, including Royal Enfield and Eicher Trucks & Buses. Royal Enfield, a globally recognized motorcycle brand, is celebrated for its classic and retro-styled bikes that cater to a niche market of motorcycle enthusiasts. Eicher Trucks & Buses, on the other hand, focuses on producing a wide array of commercial vehicles designed for both urban and long-haul transportation, with an emphasis on durability, efficiency, and technological advancement.

Eicher Motors operates through a vertically integrated model, encompassing various aspects of design, manufacturing, and distribution. The company’s operations span multiple facilities, including state-of-the-art manufacturing plants and research and development centers, which contribute to its innovation and product development efforts. Eicher’s commitment to sustainability and efficiency is reflected in its ongoing initiatives to enhance vehicle performance and reduce environmental impact. By continuously investing in technological advancements and expanding its global presence, Eicher Motors aims to maintain its leadership position in the automotive industry while addressing evolving consumer needs and regulatory requirements.

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

Segment Breakup: (In millions of USD)

  For the year ended 31^ST December 2023

Segment Breakup

1. Commercial Vehicles & Motorcycles: Revenue from commercial vehicles and motorcycles generally aligns with Shariah principles as long as the products and their use do not contravene Islamic ethics. Eicher Motors’ primary business in manufacturing and selling vehicles falls into permissible activities, provided that the vehicles are not used for activities prohibited in Islam, such as transporting alcohol or engaging in gambling.
2. Profit on Sale of Property, Plant, and Equipment: Profit from the sale of property, plant, and equipment is typically Shariah-compliant as long as the sale does not involve items or assets associated with prohibited activities. In Eicher Motors’ case, the focus on industrial and commercial equipment and property, used primarily for production and business operations, aligns with Shariah principles.
3. Other Income: This category includes various miscellaneous sources of revenue. The compliance of “Other Income” with Shariah depends on its nature. If this income comes from permissible activities, such as investments in Shariah-compliant ventures or rental income from permissible assets, it would be Shariah-compliant. Careful evaluation is required to ensure none of this income is derived from prohibited sources.
4. Grant Income on Soft Loan from SIPCOT: Grants or soft loans provided by government entities like SIPCOT are typically Shariah-compliant, provided the funds are used for purposes that do not involve prohibited activities. This segment should be reviewed to ensure that the usage of the grant aligns with Shariah principles and does not involve interest-bearing loans or financing for non-permissible activities.
5. Change in Inventories of Finished Goods, Work-in-Progress, and Traded Goods: This segment reflects adjustments in inventory valuation. It is Shariah-compliant as long as the inventory itself consists of permissible goods and is used in a manner consistent with Islamic ethics. The primary concern would be to ensure that the inventory items and their utilization do not involve prohibited activities or products.

Tricky Areas in Shariah Compliance For Eicher Motors

Commercial Vehicles & Motorcycles: While the sale of commercial vehicles and motorcycles itself is generally permissible, potential Shariah concerns arise based on their usage. If these vehicles are employed for activities contrary to Islamic principles—such as transporting prohibited items like alcohol or engaging in gambling operations—the revenue from their sale could be problematic. Ensuring that end-use does not violate Shariah principles is crucial.

Profit on Sale of Property, Plant, and Equipment: This revenue segment is typically permissible, but scrutiny is needed regarding the nature of the assets sold. If the property or equipment was previously involved in non-Shariah-compliant activities or if the sale proceeds are used for impermissible purposes, it may raise compliance issues. For instance, selling assets related to prohibited sectors or using the proceeds for non-permissible investments could pose challenges.

Other Income: This category requires careful examination as it may include various sources of revenue. Key concerns include whether any of this income derives from interest-bearing activities or investments in non-Shariah-compliant sectors. Income from financial instruments or ventures that involve interest or unethical practices would be problematic.

Grant Income on Soft Loan from SIPCOT: Grants and soft loans are generally acceptable; however, the conditions and usage of these funds need to be reviewed. The compliance issue arises if the grant or soft loan is used to finance activities or investments that are not Shariah-compliant. Additionally, if the loan involves any form of interest or financial arrangement that does not adhere to Islamic finance principles, it would be a concern.

Change in Inventories of Finished Goods, Work-in-Progress, and Traded Goods: Adjustments in inventory valuation are usually acceptable, but the nature of the inventory must be considered. If the inventory includes items related to prohibited activities or if the inventory adjustments are linked to non-compliant goods, this could raise compliance issues. Ensuring that inventory handling and valuation align with Shariah principles is essential.

Let’s have a look at the non-operating revenue of the company.

Non-operating revenue: 

(All figures in Lakhs of INR for the Year ended 31st March 2023)

It is clear from the table above that the non-operating income of the company include gains on financial instruments and finance income on lease  which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen:

 (All figures in Lakhs of INR for the Year ended 31^st March 2023)

Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31^th March 2023.

Conclusion:

Given the above information, we at Islamicly believe that Eicher Motors Limited is Shariah Compliant company as per the Shariah screening criteria.

The post Is Eicher Motors Ltd Stock Halal to Invest? Facts You Should Know first appeared on Islamicly.

Report Published as on 2nd August 2024

BlackRock Inc. is one of the world’s leading investment management firms, headquartered in New York City. Founded in 1988, the company has grown to manage a vast array of assets, with a focus on providing a wide range of investment solutions for institutions, financial professionals, and individual investors. BlackRock offers services in various asset classes, including equities, fixed income, real estate, and commodities, and is known for its pioneering work in the development of exchange-traded funds (ETFs) through its iShares brand. The firm’s extensive research and analysis capabilities, coupled with its commitment to technology and data-driven decision-making, have solidified its position as a key player in the global financial markets.

BlackRock’s activities extend beyond traditional asset management, encompassing a robust advisory and risk management division. Through its Aladdin platform, BlackRock provides sophisticated analytics and risk management tools to institutional clients, helping them navigate complex market environments and optimize investment strategies. The company is also actively involved in sustainable investing, with a strong emphasis on environmental, social, and governance (ESG) factors. This focus is reflected in their investment strategies and the promotion of sustainable practices within the industry. BlackRock’s global presence and diverse range of services enable it to cater to a broad client base, including pension funds, sovereign wealth funds, and retail investors, making it a significant influencer in the financial services sector.

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

Segment Breakup: (In millions of USD)

 For the year ended 31ST December 2023

Segment Breakup

When evaluating BlackRock Inc.’s revenue segments from a Shariah compliance perspective, it is essential to assess the nature of the activities and whether they align with Islamic finance principles. Below is an explanation of each revenue segment and its relevance to Shariah compliance:

1. Total Investment Advisory, Administration Fees, and Securities Lending Revenue

Description: This revenue segment includes fees earned from managing assets on behalf of clients, providing administrative services, and revenues from securities lending activities. Investment advisory and administration fees are typically based on the assets under management (AUM) and are charged as a percentage of the AUM. Securities lending involves lending securities to other institutions in exchange for a fee, often with collateral provided by the borrower.

Shariah Compliance: The compliance of this revenue segment depends on the nature of the assets managed and the securities involved in lending activities. If BlackRock manages Shariah-compliant portfolios, which exclude non-permissible activities such as interest-based financial services, alcohol, gambling, and pork-related products, then the advisory and administration fees can be considered compliant. However, securities lending can pose compliance issues if the securities involved are not Shariah-compliant or if the lending structure involves interest (Riba), which is prohibited in Islamic finance.

2. Investment Advisory Performance Fees

Description: Performance fees are earned by BlackRock when the investment portfolios they manage exceed certain performance benchmarks. These fees are typically calculated as a percentage of the portfolio’s outperformance relative to a predefined benchmark.

Shariah Compliance: The permissibility of performance fees hinges on the compliance of the underlying investments. If the portfolios are Shariah-compliant, then the performance fees associated with managing these assets are also compliant. However, if the portfolios include non-compliant investments, the associated performance fees may also be considered non-compliant.

3. Technology Services Revenue

Description: BlackRock generates technology services revenue through its Aladdin platform, which provides risk management, portfolio management, and financial analytics services. These services are offered to institutional investors, including other asset managers and financial institutions.

Shariah Compliance: The technology services provided by BlackRock are generally considered compliant from a Shariah perspective, as they do not inherently involve non-permissible activities. However, the compliance may be contingent on how these services are used by clients, particularly if they are applied to non-compliant financial instruments or activities.

4. Distribution Fees

Description: Distribution fees are earned from the marketing and sale of investment products, such as mutual funds and ETFs. These fees are typically charged to investors or fund managers as compensation for distributing the financial products.

Shariah Compliance: The compliance of distribution fees is tied to the nature of the financial products being distributed. If BlackRock distributes Shariah-compliant investment products, such as funds that exclude interest-bearing instruments and stocks involved in non-permissible activities, then the distribution fees are compliant. Conversely, fees from distributing non-compliant products would not be Shariah-compliant.

5. Advisory and Other Revenue

Description: This category encompasses various consulting and advisory services provided by BlackRock, which may include financial planning, asset allocation advice, and other related services.

Shariah Compliance: Advisory services are generally Shariah-compliant if they do not involve advising on or facilitating investments in non-permissible sectors or activities. The compliance status will depend on the specific nature of the advisory services and the underlying assets or activities they support.

Tricky Areas From Shariah Perspective

When assessing BlackRock Inc.’s operations from a Shariah compliance perspective, there are several “tricky areas” to consider:

1. Securities Lending: BlackRock generates revenue from securities lending, where it temporarily loans out securities to borrowers. This activity often involves earning interest, which is not permissible in Shariah law. While the underlying assets may be Shariah-compliant, the interest component poses a significant compliance issue.
2. Investment Advisory and Administration Fees: While these fees are generally compliant, concern arises with the types of investments managed. If BlackRock manages portfolios that include non-compliant sectors such as alcohol, gambling, pork, or conventional financial services (interest-based), the associated fees could also be deemed non-compliant.
3. Performance Fees: These are contingent on the performance of investment portfolios. The challenge lies in ensuring that the portfolios themselves adhere to Shariah principles. If performance fees are derived from gains in non-compliant investments, they would be considered non-compliant.
4. Technology Services Revenue: BlackRock provides technology solutions like the Aladdin platform, which supports risk management and portfolio construction. While the technology itself is neutral, its use in managing non-compliant investments or facilitating non-permissible financial activities can raise compliance concerns.
5. Distribution Fees: These fees are tied to the distribution of investment products, such as mutual funds and ETFs. The compliance issue here revolves around whether the products are screened for Shariah compliance. If they include non-compliant elements, like interest-bearing instruments or stocks in prohibited sectors, the distribution fees may also be affected.
6. Advisory and Other Revenue: BlackRock’s advisory services encompass a wide range of financial advice, including strategies that may involve non-compliant investments. The complexity and diversity of these services make it challenging to ensure full adherence to Shariah principles, especially when the advice touches on areas like conventional finance, insurance, or derivatives.
7. Securities Lending: BlackRock generates revenue from securities lending, where it temporarily loans out securities to borrowers. This activity often involves earning interest, which is not permissible in Shariah law. While the underlying assets may be Shariah-compliant, the interest component poses a significant compliance issue.
8. Investment Advisory and Administration Fees: While these fees are generally compliant, the concern arises with the types of investments managed. If BlackRock manages portfolios that include non-compliant sectors such as alcohol, gambling, pork, or conventional financial services (interest-based), the associated fees could also be deemed non-compliant.
9. Performance Fees: These are contingent on the performance of investment portfolios. The challenge lies in ensuring that the portfolios themselves adhere to Shariah principles. If performance fees are derived from gains in non-compliant investments, they would be considered non-compliant.
10. Technology Services Revenue: BlackRock provides technology solutions like the Aladdin platform, which supports risk management and portfolio construction. While the technology itself is neutral, its use in managing non-compliant investments or facilitating non-permissible financial activities can raise compliance concerns.
11. Distribution Fees: These fees are tied to the distribution of investment products, such as mutual funds and ETFs. The compliance issue here revolves around whether the products are screened for Shariah compliance. If they include non-compliant elements, like interest-bearing instruments or stocks in prohibited sectors, the distribution fees may also be affected.
12. Advisory and Other Revenue: BlackRock’s advisory services encompass a wide range of financial advice, including strategies that may involve non-compliant investments. The complexity and diversity of these services make it challenging to ensure full adherence to Shariah principles, especially when the advice touches on areas like conventional finance, insurance, or derivatives.

The company does not have any non-operating income.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen:

 (All figures in Lakhs of INR for the Year ended 31^st March 2023)

Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31^th March 2023.

Conclusion

Given the above information, we at Islamicly believe that Black Rock INC is Shariah Not Compliant company as per the Shariah screening criteria.

The post Is BlackRock Inc Stock Halal to Invest? Facts You Should Know first appeared on Islamicly.

Report Published as on 2nd August 2024

We have conducted a comprehensive review on Boeing Co  from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.

The Boeing Company (or simply Boeing) (/ˈboʊɪŋ/) is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, and missiles worldwide. The company also provides leasing and product support services.

The Boeing Company is one of the world’s largest aerospace and defense manufacturers. As a leading global aerospace company, Boeing develops, manufactures and services commercial airplanes, defense products and space systems for customers in more than 150 countrie.

Boeing Co. continues to be a leader in the aerospace industry, driving innovation and delivering high-quality products and services to its global customers. The company continues to expand its product line and services to meet emerging customer needs. Its broad range of capabilities includes creating new, more efficient members of its commercial airplane family; designing, building and integrating military platforms and defense systems; creating advanced technology solutions; and arranging innovative financing and service options for customers.

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

Segment Breakup: (In millions of USD)

(In millions of USD) For the year ended 31^ST December 2023

Commercial Airplanes Segment:

This segment develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide. We are a leading producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines. This family of commercial jet aircraft in production includes the 737 narrow-body model and the 767, 777 and 787 wide-body models. Development continues on the 777X program and the 737-7 and 737-10 derivatives.

Services: Boeing offers comprehensive fleet support services, including maintenance, engineering, and training.

Defense, Space & Security Segment:

This segment engages in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for strike, surveillance and mobility, including fighter and trainer aircraft; vertical lift, including rotorcraft and tilt-rotor aircraft; and commercial derivative aircraft, including anti-submarine and tanker aircraft. In addition, this segment engages in the research, development, production and modification of the following products and related services: strategic defense and intelligence systems, including strategic missile and defense systems, command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR), cyber and information solutions, and intelligence systems, satellite systems, including government and commercial satellites and space exploration.

Global Services Segment:

This segment provides services to our commercial and defense customers worldwide. Global Services sustains aerospace platforms and systems with a full spectrum of products and services, including supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, pilot and maintenance training systems and services, technical and maintenance documents, and data analytics and digital services

Tricky Areas From s Shariah Perspective

When examining Boeing’s revenue streams from a Shariah compliance perspective, several complex issues arise. Boeing, as a multinational corporation, has diverse sources of income that include both permissible and potentially non-permissible activities under Islamic law. Here are the key areas to consider:

Primary Revenue Streams

Commercial Airplanes:

Manufacturing and Sale of Aircraft: This is Boeing’s largest segment, generating significant revenue from the sale of commercial aircraft to airlines worldwide. This activity is generally permissible in Shariah as it involves the production and sale of tangible goods.

Leasing of Aircraft: Leasing arrangements need careful scrutiny. If they involve interest-based financing, they may be considered non-permissible. However, operational leases, where the lessor retains ownership and only rents out the aircraft, can be compliant.

Defense, Space & Security:

Military Aircraft and Weapons Systems: This segment involves the sale of military hardware and systems, which may raise ethical concerns from a Shariah perspective. The involvement in the arms industry can be deemed non-permissible due to the potential harm these products can cause.

Space Exploration and Satellites: These activities are generally permissible, as they involve scientific and technological advancements. However, contracts involving defense and surveillance applications may need further scrutiny.

Global Services:

Maintenance, Repair, and Overhaul (MRO) Services: Providing MRO services for aircraft is permissible as it involves maintaining and enhancing the usability of tangible assets.

Training and Support Services:

These services are also generally permissible, provided they do not involve non-permissible elements such as interest-based financing or unethical practices.

Tricky Areas from a Shariah Perspective

Interest Income:

Boeing may earn interest income from its cash reserves and investments. Any revenue generated from interest (riba) is strictly non-permissible in Islam. Detailed financial reports need to be examined to determine the proportion of income derived from interest.

Debt Financing:

The use of interest-bearing debt to finance operations is a significant concern. Shariah law prohibits engaging in transactions that involve riba. Boeing’s financial structure and the extent to which it relies on debt financing would need to be assessed.

Investments and Partnerships:

Boeing’s investments and partnerships with other companies, especially those involved in non-permissible activities (e.g., alcohol, gambling, conventional financial services), need thorough evaluation. If Boeing holds significant stakes in such entities, it may affect its overall compliance status.

Ethical Concerns in Defense Contracts:

Contracts involving the sale of military equipment and defense services, especially those used in conflicts causing harm to civilians, pose ethical issues. From a Shariah perspective, the involvement in activities that lead to significant harm or oppression is non-permissible.

Let’s Have a Look At The Non-Operating Revenue Of The Company

Non-operating revenue: 

(All figures in Lakhs of INR for the Year ended 31st March 2023)

It is clear from the table above that the non-operating income of the company include interest income  which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen:

 (All figures in Lakhs of INR for the Year ended 31^st March 2023)

Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31^th March 2023.

https://www.sec.gov/ix?doc=/Archives/edgar/data/12927/000001292724000010/ba-20231231.htm

Conclusion

Given the above information, we at Islamicly believe that Boeing Corporation is Shariah Compliant company as per the Shariah screening criteria.

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