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Russian Muslims can’t be engaging in certain financial activities

On March 29th, the Spiritual Administration of Muslims of the Russian Federation issued a guide for Muslims on what types of financial activities are prohibited. This document (available in Russian) prescribes a strict ban on short sales (shorts) and margin trading. The document also explains the ban on purchasing shares from companies that produce alcohol, pig farming, and gambling.

Financial activities prohibited for Russian Muslims

To understand why such financial activity is forbidden for Muslims, let’s understand the basic concepts and terminology.

Short selling (shorts) is the sale of assets, currencies, or securities that the investor does not own but borrows from a broker. Traders who “play a short position” or “short” hope they can buy the asset at a lower price, thereby profiting from the fall in value. Margin trading assumes that the investor trades the money he borrowed or the securities he borrowed from the broker. Investors must have collateral as assets on a brokerage account to take out loans.

Investment Rules following Shariah law Muslim investors must follow Shariah rules when investing. They prohibit them from participating in futures transactions, trading stocks for rent, or entering into fixed-term contracts. However, they can participate in spot trades and open long stock positions. A spot contract is a special transaction made immediately, unlike a fixed-term contract that is concluded and executed later.

Transactions permitted by Shariah. Shariah laws prohibit certain business and financial activities, such as alcohol production, pig farming, and gambling. Therefore, as authorized transactions, Muslims can use only securities issued by companies not involved in these activities and do not raise funds by receiving interest from their activities. Examples of such companies are clothing manufacturers and telecom operators. Rules for the acquisition of shares of companies engaged in permitted financial activities but raising funds at interest Companies involved in approved activities and raising funds at interest must meet certain conditions:

1. The company’s charter should not assume that there are usurious transactions or transactions with prohibited products among its goals.

2. The share of funds raised through interest-bearing loans (including preferred shares, leasing contracts, and derivatives) should not exceed 30% of the company’s total capital or market capitalization. Interest-bearing deposits are prohibited. Interest-bearing deposits, including investments in companies involved in activities contrary to the laws of Islam and derivative investments, should not exceed 30% of the company’s total capital. Profit from financial activities contrary to Islamic law should not exceed 50% of the company’s total income, regardless of whether this money is received from prohibited activities or from possessing prohibited property or rights. Recommendations of the Ulema Council of the Russian Federation The Ulema Council of the Russian Federation strongly recommends that Muslim investors close any positions related to companies that do not adhere to Sharia law. In addition, any profit received from such activities should be donated to charity.

Halal investment is a form of investment that complies with the norms of Islamic law. The DOOM of the Russian Federation advises Muslims who want to invest in consulting with qualified Islamic traders to verify the legality of the proposed investments.

In October 2021, in cooperation with Sberbank, the Moscow Exchange began calculating Islamic investment indices (mxshar, mxshartr). Indexes consist of companies’ stocks that adhere to Islam’s precepts and postulates. Since the beginning of 2023, the mxshar index has registered an impressive 10.5%.

Digital investments We live in the era of digitalization when digital assets are replacing traditional paper assets. Technology makes it easier than ever to access information and expand how to communicate with others. More and more companies are using the Internet to improve their work. Thanks to the improved speed and transparency of data access, digital finance and investment are becoming an increasingly popular way of investing and making a profit.

Financial activities prohibited for Russian Muslims

Islamic Coin is a digital currency conforming to the norms of Islam and Shariah, functioning in its own blockchain Haqq, which means “Truth.” Already at the stage of closed sales, IslamicCoin aroused huge investor interest and raised more than $ 200 million in just a few weeks. Unlike technically outdated Bitcoin and Ethereum, which have many problems, IslamicCoin uses the full power of the most progressive blockchain technologies and is based on the most fair and reliable ideology and rules of conduct.

Successful investors choose ideology, technology, and prospects based on something more than minor fluctuations in price charts. For almost 20 years of the existence of a new type of digital money, cryptocurrencies have not brought a drop of real value into this world and have not made people free, independent, and happy. And this means it’s time for a new type of finance based on responsible choices and new values!

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