Ensuring Halal Investments: Indonesia’s Sharia Stock Screening
The Islamic capital market in Indonesia has experienced rapid growth in recent years. This expansion is driven by increasing public awareness of the importance of investing in accordance with Islamic Sharia principles. Shariah-compliant equity investment has become an attractive option for Muslim investors, offering the potential for halal profits that align with their religious values.
However, to avoid riba (usury), gharar (uncertainty), and other prohibited practices in stock investing, clear and reliable guidelines are essential. The National Sharia Council of the Indonesian Ulema Council (DSN MUI) came up with Fatwa No. 135/DSN-MUI/V/2020 on stocks. This fatwa serves as a guide for Muslim investors in choosing stocks that comply with Islamic sharia. This article will briefly discuss this sharia standard and explain how to select stocks that fulfil this standard.
Understanding the DSN MUI Shariah Standard for Islamic Stocks
According to the DSN MUI, sharia stocks are securities that represent a stock of ownership in a company that fulfils the principles of Islamic sharia. In explaining the sharia principles related to stocks, DSN MUI has issued Fatwa No. 135/DSN-MUI/V/2020 on Stocks, which contains several criteria that must be met by issuers and stocks in order to be classified as sharia stocks. These criteria include:
1. Issuer’s Business Activity
Issuers must not have main business activities that are contrary to Islamic sharia. Business activities that are contrary to sharia principles themselves, as mentioned by the Financial Services Authority (OJK), are:
- Gambling and games classified as gambling;
- Trading that doesn’t involve the delivery of goods or services;
- Trading with false supply/demand;
- Interest-based banks;
- Interest-based financing companies;
- Sale and purchase of risks that contain elements of uncertainty (gharar) and/or gambling (maisir), including conventional insurance;
- Producing, distributing, trading, and/or providing goods or services that are haram in substance (haram li-dzatihi), goods or services that are haram not because of their substance (haram li-ghairihi) as determined by DSN-MUI; and/or goods or services that damage morals and are mudarat;
- Transactions that contain elements of bribery (risywah);
Therefore, any issuer that has business activities as described above cannot be considered as sharia stock.
2. Financial Ratio
Issuers whose stocks are included in the category of sharia stocks must have financial ratios that meet sharia provisions, namely:
- Total interest-based debt compared to total assets is not more than 45% (forty-five percent);
- Total non-halal income compared to total operating income and other income is not more than 10% (ten percent).
Therefore, issuers whose stocks are included in the sharia stock criteria have certainly fulfilled the above financial ratio requirements in their company’s finances.
Selecting Sharia-compliant stocks at the Indonesia Stock Exchange
The Indonesia Stock Exchange (IDX) provides several products and services that apply DSN MUI sharia standards, making it easier for Muslim investors to invest halal and in accordance with sharia. Here are some of them:
1. Indonesia Sharia Stock Index (ISSI)
ISSI is a stock index that measures the price performance of all sharia stocks that meet the selection criteria of DSN MUI. ISSI is a reference for investors to monitor the overall price movement of Islamic stocks.
2. Daftar Efek Syariah (DES):
DES is a list of sharia securities, including sharia stocks issued by IDX, and fulfils the selection criteria of DSN MUI. Investors can select stocks from this list to invest in. DES itself is always updated every six months, in June and December.
3. Sharia Online Trading System (SOTS):
SOTS is a sharia stock trading system where investors can buy sharia stocks. Any stocks that do not fulfil sharia principles will not be able to be bought on SOTS. Investors also cannot buy stocks in a non-shariah compliant manner, such as through margin trading or short selling on SOTS.
Choosing Islamic Stocks in Securities Crowdfunding
Securities crowdfunding is a service that allows small and medium-sized businesses to issue securities on a platform outside the stock exchange. Investors can also invest in securities on the Securities Crowdfunding platform without thinking about the procedures for investing on the stock exchange. Securities crowdfunding includes stocks among its investment products. The process for selecting Islamic stocks on the Securities Crowdfunding platform involves investing in Islamic Securities Crowdfunding, or Securities Crowdfunding with an Islamic business unit, and then selecting Islamic stocks from the platform.
Islamic stocks are one of the investment instruments in the capital market that adhere to sharia principles. Islamic stocks are one of the ways for a Muslim to invest in the capital market in a halal manner. Hopefully, this article can provide knowledge about Islamic stocks.
Wallahu a’lam
References
Otoritas Jasa Keuangan Republik Indonesia. (2017). Peraturan Otoritas Jasa Keuangan Nomor 35/POJK.04/2017 tentang Kriteria dan Penerbitan Daftar Efek Syariah [Review Of Peraturan Otoritas Jasa Keuangan Nomor 35/POJK.04/2017 tentang Kriteria dan Penerbitan Daftar Efek Syariah].
Majelis Ulama Indonesia, D. S. N. (2020). Fatwa Dewan Syariah Nasional-Majelis Ulama Indonesia No: 135/DSN-MUI/V/2020 [Review Of Fatwa Dewan Syariah Nasional-Majelis Ulama Indonesia No: 135/DSN-MUI/V/2020].
Syariah. (n.d.). Www.ojk.go.id. https://www.ojk.go.id/id/kanal/syariah/pages/pasar-modal-syariah.aspx
Otoritas Jasa Keuangan Republik Indonesia. (2020). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 57 /Pojk.04/2020 Tentang Penawaran Efek Melalui Layanan Urun Dana Berbasis Teknologi Informasi [Review Of Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 57 /Pojk.04/2020 Tentang Penawaran Efek Melalui Layanan Urun Dana Berbasis Teknologi Informasi].
Bursa Efek Indonesia. (n.d.). Indeks Saham Syariah [Review of Indeks Saham Syariah]. Https://Www.idx.co.id. https://www.idx.co.id/id/idx-syariah/indeks-saham-syariah
Bursa Efek Indonesia. (n.d.). Transaksi Sesuai Syariah [Review of Transaksi Sesuai Syariah]. https://www.idx.co.id/id/idx-syariah/transaksi-sesuai-syariah
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