Contradiction In Trading Stocks
First, it is important to understand what Riba is. Riba refers to charging additional money on the principal amount of a loan, which is prohibited. A business loan, despite being labeled as a ‘loan,’ is essentially an investment by the bank, whereas a personal loan is purely a loan in the traditional sense. Scholars who do not distinguish between a loan and a business loan argue that the profit generated from a business loan constitutes Riba and is therefore haram. On the other hand, those who view a business loan as an investment, rather than a loan, maintain that it is halal. In the case of a loan, the lender does not concern themselves with how the borrower uses the money; the borrower is free to utilize it as he wishes. However, in an investment, both parties enter into a contract, agree on terms, and specify the profit-sharing arrangements, making it an investment rather than a loan. Once it is established that a business loan is an investment, many related questions are resolved automatically.