zakat

Forex and stock trading in Islam

Is trading forex and the stock market permitted in Islam?

Selling one type of currency for another and making a profit by this is permitted in Islam. However, what is known as “forex” can contain many practices that are prohibited in Islam, such as interest or futures contracts. So there cannot be a general statement on the permissibility or not of forex until that specific company’s practices are studied.

As for stock trading, this too is permitted technically as long as there is no interest or futures is involved, and as long as the stock being traded does not make its profit largely by a practice that is forbidden in Islam, such as bank stocks that make most of their money through interest. But investing in a stock such as Microsoft that makes some money through interest but that makes most of its money through permissible means is permitted, however, the amount of profit it makes through interest must be deducted and donated from the value of the stock annually.

Also note that any money invested in currency or stock trading is annually zakatable. So if a person has a million dollars invested in currency or stock trading (or real estate trading), they are required to pay 2.5% of this money annually for zakat whether they make a profit or loss. The principle is that all speculatively invested wealth is zakatable.

References:

The zakat of monthly income

Salamu alaikum, brother. I have two questions I wish for an answer. First, I wanted to know if the 10% zakah from our monthly job income apply to only working male or both working male and working female? Second and last, if a youngster is currently unemployed but is granted monthly allowance from their parent, do they have to give the 10% as a sadaqa? That is all and thank you for taking your time. Have a good Ramadan, may Allah Bless you and your family.

Alaikumassalam wa rahmatullah,

I am not an expert on zakat, so I recommend that you consult a specialist. According to my understanding zakat is not calculated on your job income directly but on your savings. Once you have enough money saved to equal the value of 85 grams of gold (about $3500 USD) or 595 grams of silver (about $279 USD), then you would be required to pay 2.5% (not 10%) of this saved amount in zakat after a year passes (the lower amount, that is $279 USD, is preferred when the two prices differ). If you have $279 in the bank at lunar month 1, and at lunar month 2 you add another $500 to your savings, then once a lunar year passes, you would pay 2.5% of the $279 as zakat, and a month later you would pay 2.5% of the $500. Each month’s savings would get its own zakat taken out after a year.

You can also simplify things by setting a particular month of the year, such as Ramadan, to pay zakat. Each Ramadan you would look at your savings and pay 2.5% of it regardless of what time of the year you made the separate amounts of money that went into it.

There is no difference between males and females in zakat. And according to the majority opinion zakat is also required on the money of youth if it is more than 595 grams of silver and a year passes on it.

References:

A Short Introduction to Usury: How to Make the Rich Richer, the Poor Poorer and Destroy the Middle Class

Download links: PDFePubMobi (Kindle)

In this short ebook I discuss the history of usury, how it works, its effects on society and how the system can be reformed. An important part of the discussion is how today automation leads to wealth inequality and wage slavery, and how through using a usury-free system and a wealth and speculation tax automation can be turned into an investment that all of society benefits from.

I discuss how through avoiding usury and following a wealth tax inspired by Islam’s zakat basic income system communities can bypass the banks and corporations and revitalize their local economies. This is something that can be done by anyone right now, without reference to the government.

The point of the Islamic acts of worship

A question received on tumblr:

What are the importances of acts of worship Prayer, zakat and fasting etc

At the most basic level these acts reaffirm God’s important in our lives. We Muslims cannot ignore God, saying “we have faith” and then go for days without thinking about God. The prayers interrupt our lives five times a day. Fasting interrupts a whole month of the year.

As for zakat, it provides basic income to the poor. If the people of the United States paid zakat, it could amount to $100 to $500 billion dollars a year, meaning that within a few years there wouldn’t be a single homeless or poor person in the country, and every poor person (belonging to the bottom 50% of society) would get a monthly income of $1000 or more from zakat.

As far as I know no Muslim country properly applies the zakat system, which is why there is so much widespread poverty in countries like Egypt. Zakat has to be taken, it is not a voluntary act. Most rich people are not generous and would rather not pay 2.5% of their uninvested wealth to the poor every year, they would rather do as the Jews and Christians of America do, lending their wealth to the poor and charging them 5% or more interest.

In the zakat system, the poor charge interest on rich people’s uninvested wealth, the money they hoard in their bank accounts. In America’s usurious system, the rich charge interest on the poor, to the tune of more than a trillion dollars per year. American taxpayers paid upwards of $200 billion on money borrowed from usurers to pay for government expenditures, which is why the rich and powerful of America constantly want to increase the size of the military and to instigate new wars, such as with Iran and Russia. War requires spending, and the money for it has to be borrowed from the rich, and the interest on that money has to be paid by the average taxpayer.

For the rich, war always means money. Islam breaks this cycle of evil and destruction by prohibiting usury (all charging of interest) and enforcing zakat.

As for other acts of worship, they all have some wisdom if you look into them.