Defense/weapons stocks and permissibility

💰 Everyday Islamic Finance Savings & Investing
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#1

Salam,

So one thing I noticed in zoya is that it flags weapons and defense revenue as not shariah compliant. Does someone know what is the justification aofi uses for saying these categories are not compliant?

I know some stocks like BA are flagged as not shariah for bds reason (tho that raises the questions is it really not halal just because of bds)

Yeah just some clarification on the subject would be great. I am reaching out to local scholars to get their opinion on the issue but wonder if what is the app using for that.

#2

This is an interesting topic.
(1) Firstly coming to AAOIFI guidelines only 3 specific industries are mentioned as non compliant

  • Riba / Interest, Pork, Alcohol. So clearly the guidelines are not a complete ‘rulebook’ and left to interpretation. It is obvious that gambling and adult entertainment is not permitted.

(2) In my understanding Tobacco is consider Makruh and not Haram. However, most screeners and investment funds rule out Tobacco

(3) Coming to defense, another grey area. Many rule it out. Atleast one competing screener does not rule it out. Defense itself is a wide industry from actual weapons manufacturing to the IT services and supply chain. I do see Zoya has some of the IT services as compliant.

Discussion on this topic would be good. Everyone quotes AAOFI but AAOIFI does not give an exhaustive list that everyone puts up on their website.

#3

Never understood why weapons/defense area is not considered halal. Every religion, culture, nation invests into it. It is needed by Muslim and non-Muslim nations alike. Being heavily armed can actually bring about peace.
I personally have no objection about investing in a defense company if they meet all the other requirements.

#4

One of my friends who is a student of knowledge told me that his teachers taught him a mantra when approaching any matter:

“taqwa (ie. God-consciousness) before fatwa” (the designation of something being halal / haram).

There’s an authentic (sahih) hadith where the Prophet (PBUH) says,

“Leave that which makes you doubt for that which does not make you doubt.” - Sunan an-Nasa’i 5711; In-book reference : Book 51, Hadith 173

Basically, when in doubt, stay out.

I believe the issue is more broadly not in investing in weapons per se. But in how they are used. Guns, just like kitchen knives, aren’t necessarily bad in and of themselves. It’s how they are used which is the point of controversary.

It’s not unlike investing in a drug manufacturing company. If you know that those drugs will be used to help people, that’s amazing, go for it if the financial screens are ok.
But if you know that company has a reputation / tendency to push those drugs onto drug dealers, then you would probably want to err on the side of caution of not investing in such a company as your investment may be doing society more harm than good.

Going back to the issue at hand, I believe it is investing in American (or other foreign companies) that manufacture weapons / technology for militaries, specifically militaries that have brought about overall harm to innocent people.

The U.S. military has such a track record. You can read more about that here.

The U.S. military too often fails to effectively investigate civilian deaths and injuries in its operations around the globe…Military investigators have dismissed or ignored important sources of evidence from outside the military, and risk missing vital information about their operations if they continue to do so, the groups said.

Most religions, cultures, and nations also invest in the alcoholic beverage industry. It doesn’t make it right.

The issue isn’t with having a military, but in what that military does. Investing in companies that enables a corrupt military is problematic.

And yes, this is ultimately a political discussion, but one that cannot be ignored when discussing weapons / defense stocks.

I would think that the defense for military stocks stems from missing out on good returns. I would go so far as to say that you don’t need the military in your portfolio.

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This is a chart showing the S&P500 (SPX), XAR (a top performing military / aerospace ETF), NASDAQ, and QQQ. This is as far back as the data goes for all of these. I did not conveniently select the timeframe to make a point.

I’ll end with this authentic (sahih) hadith:

“Verily, you will never leave anything for the sake of Allah Almighty but that Allah will replace it with something better.” - Musnad Ahmad 22565

May Allah give us the wisdom to invest what is best for both our societies and our pockets. May Allah bless you all!

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#5

Anyone who says stocks in the defense industry is haram is either not thinking it through or being ridiculous. Having read the comments I see a few people talk about the U.S. military being bad. This is entirely irrelevant. The question is “is this product/service haram?” The answer is no. Everyone agrees it is part of our religion to arm ourselves with the best weapons, tactics etc possible.

Next, are these companies doing something haram in how they run their business? In the case of American companies they are regulated by U.S. Labor laws and SEC regulations. The only thing these companies do that is haram as far as I can tell is they take loans that require interest payments. They treat employers well, they aren’t involved in some criminal organization. So operationally they are fine.

Using Lockheed martin as an example, They have 4 revenue streams. The F-35 makes up 27% of total sales. The F-35 is a fighter jet which has yet to be invovled in any military operations. some question whether it will ever be used, and whether it can even be used. So for those of you who say the U.S. military is evil, as far as 27% of LMT’s sales go that’s irrelevant since this specific product isn’t being used.

Another category is Missiles & Fire systems. Sales here consist of the patriot missile system (used for blowing up other missiles and enemy aircraft) and weapons targeting systems (computers that help pilots lock on to targets for example)

The 3rd revenue stream is “rotary systems” these are various types of helicopters. I don’t think I need to explain that helicopters are not haram.

The 4th revenue stream is “space” this includes nukes that are carried by submarines (never used in the history of ever) A landing vehicle used by NASA, and missle defense stuff to defend the geographic U.S. from missile attacks (also something that has never happened in the history of ever).

Some companies in defense could be haram, like if there were a mercenary stock you can invest in, that would probably be hard to defend as not haram.

Lastly the idea that investing in military companies is bad because it enables corrupt militaries is ridiculous. The only exception to this would be a company that only sells to a military that is literally committing acts of genocide. A farmer selling food to a prostitute is “enabling” the prostitute to continue their line of work because without food the prostitute would less attractive, but I don’t think anyone here seriously going to argue that selling food to a prostitute is haram.

#6

In principle, I agree with your point of view, yet have doubts to its blanket classification as permissible.

A simple analogy: did PBUH buy his sword and shield (weapons)? If those items were purchased, then ‘manufacutirn of weapons’ is permissible.

The question, if you agree with the above statement, is what is a permissible weapon?

There are statements related to not killing the innocent and not harming trees during times of ware.

Should a weapon that can kill the innocent and destroy trees be ranked permissible as a sword. e.g. A bomb vs sword?

Is there a test to accuracy that should be applied, as one could reason that a sword is an accurate instrument as is a bow and arrow. A bomb of certain magnitude is not. A drone could be seen as precise while a machine gun docked to a helicopter/plane not.

Nuance I would suggest is important, as clearly an atomic bomb is not a defensive weapon, as in Islam war is of a defensive nature, not oppresive.

#7

Further to my prior post, I add the following:

Surah 47 v 4.: “So when you meet the disbelievers ‘in battle’, strike ‘their’ necks until you have thoroughly subdued them, then bind them firmly. Later, ‘free them either as’ an act of grace or by ransom until the war comes to an end.”

Surah 5 v 32: “…ordained for the children of Israel that whoever takes a life - unless as a punishment for murder or mischief in the land - it will be as if they killed all of humanity;…”

Based on the above as a starting framework for evaluating weapons as sharia compliant may be of benefit.

Example: Would a bomb pass the test of these two versus? Undoubtedly there will someone who say yes it is compliant as a situation may occur in which only one aggressor is in a building thus no innocent people are killed. How defensible is this logic, it is like arguing the exception makes the rule.

If you have other versus from the Quran or Hadith please add so we may derive a more robust criteria as clearly weapons are a fundamental part of human existence as evil must be fought when it attacks.

#8

You’re just picking and choosing. Prophet Yusha pbuh my name sake was commanded to kill women, children, livestock etc. literally genocide. So what is permissible and what isn’t is dependent on the war.

Saving trees in a desert is easy to do given they are few in number. In a war where the forest is used as cover to protect the enemy and saving the trees means defeat would change how important saving trees are.

Likewise if the enemy is despicable and uses children and human shields so you can’t attack them are you going to let the enemy kill you and oppress your people? Hopefully you wouldn’t.

#9

Muslims follow the Quran and Sunnah, not what may or may not have happened at the time of Moosa (PBUH) as we know that only what is confirmed about the times of Moosa (PBUH) by the Quran and Hadith are factual.

If you have Quran and Hadith (sahi) to support your position please share.

Thank you for contributing to the conversation.

#10

Using weapons to defend yourself during war is necessary, but investing and profiting from them is not. This is my personal take, and I believe it’s the same rationale used by most shariah boards that deem it to be an impermissible investment category.

EDIT: For a deep dive on this topic, see our recent blog post:

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