 We shall continue with our discussion on investing in shares of listed company. We have already discussed different methodologies as employed by different index providers in Islamic banking and finance for stock picking. In this module we shall be asking some questions and of course I would be answering these questions as well for you to have better understanding of issues involving buying and selling of shares of listed companies of course in a Sharia compliant way. We have established the fact that we can buy shares or stocks of listed companies in a Sharia compliant way if we follow certain conditions, if we follow certain rules which have been listed in different methodologies for stock picking in a Sharia compliant way. Question number one for the discussion in this module is can stocks or shares be bought on a murabha basis? We are discussing shares, stock market etc. not just for the sake of having a discussion on this topic but rather our one objective is to see whether Islamic contracts and Islamic modes of financing they have relevance to this kind of business. We have studied murabha, mudarbha, musharaka, salam, istisna etc. So the question arises can we use these contracts to buy and sell shares? Murabha is one contract which is very heavily used in Islamic banking and finance. In the context of trading in listed stocks can we use murabha to buy shares? What does this mean? Murabha as you know is a cost plus contract which is normally used in Islamic banking and finance as a deferred payment murabha i.e. the commodity or the asset is received now and there is a provision for the payment of the price to take place in future. So in other words can we use shares on credit? This is the question. Some of you might think that it is not possible to use the concept of murabha for buying shares in a company because actually that share which a person would be buying is not representative of an identified share in the company. Remember I said that a share represents an undivided ownership right in a company which happens to be unidentified as well. In a Sharia compliant sale it is important that whatever is being bought and sold should be identifiable. In the case of shares however the person is not just buying the share. The person is buying the share into the company which means what? The person is actually investing in the company. So the question arises can someone invest in a company in such a way that he or she can delay the amount of investment and start benefiting from the ownership rights. If this is a direct business this would be an absurd proposition i.e. If I go to someone who is running a business and I say I want to be your partner from today however I am going to pay you my share in the partnership after one month. The person would say go away. However when we are referring to murabha for the purchase of shares it is actually someone who is financing this murabha purchase. It could be a financial institution, it could be an individual or it could be someone else. It is not the company itself, it is not the shareholder, it is another investor who is providing me this opportunity to invest in the company by way of buying shares on a murabha basis. This is acceptable from Sharia viewpoint hence we say that it is permissible to buy and sell shares on a stock market in a Sharia compliant way. It is permissible to buy such shares on a murabha basis. Second question can stocks be subject matter of murabha? What does this mean? Can someone party A agree with another party B in such a way that party A says I am willing to give you the capital. You should be doing business in shares. So basically the business would be buying and selling stocks from a stock market say Pakistan stock exchange or from New York stock exchange from London stock exchange wherever. So I am going to give you the money. You do this business of buying and selling of shares with a view to make some money for both of us. Again it is very simple, mudarbha can be used for this kind of business. Now similarly musharaka can be used for buying and selling of shares of listed companies. It is just like mudarbha however in this case party A and party B pool their money so that both of them or one of them can buy and sell shares of listed companies with a view to make some profit. So that is acceptable as well from a Sharia viewpoint. Next question can selam be used to buy and sell listed companies stocks? And simple answer to this question is no, why? Because it is a fundamental requirement of selam that it cannot be used to buy or sell a specific item. I cannot sell you this pen on a selam basis. This is a basic requirement of selam and this requirement comes from a prophetic tradition hadith of prophet sallallahu alayhi wa sallam which prohibits sale or purchase of produce of a particular field of land. Because in case of shares specific number of shares are sold of a specific company. So in general quite a number of Islamic contracts can be used to buy and sell shares with a limitation that selam cannot be used to trade in shares it can be used selam can be used for other commodities and so on but when it comes to sale and purchase of shares accounting and auditing organization for Islamic financial institutions its Sharia standard on selam actually prohibits sale and purchase of shares on a selam basis.