ISLAMIC CAREER PLANNING – EP5 – IS INVESTMENT BANKING HARAM?

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So generally in the city you’ve got investment banking you’ve got accountancy you’ve got management consultancy you’ve got law firms and that’s probably about it you’ve got maybe insurance as well the first thing to say is that if you’re going into an advisory role that is a role where you are selling a specific service that in of itself is not haram so for example

Accountancy for example law for example consultancy these things are at least at the outset there they would be deemed permissible now if you’re working as a finance lawyer i would personally be very uncomfortable with that and they’re specific a hadith about not witnessing contracts that are interest based contracts and as a lawyer what where you are drafting

This thing and you’re helping them execute this stuff that would be a problem but you know post fact auditing of accounts or anything like that or even advisory when the structuring of transactions is is fine because strictly speaking you’re providing an advisory service then we get to investment banking and my view on investment banking is that generally speaking

It’s not permissible and that is because investment banking is focused on debt finance it’s focused on trading and trading specifically in things like derivatives forwards futures options cfds you know debt based instruments like bonds and the mainstream consensus or all of these instruments is that this is haram now there are debates and you know we can go into

That about forwards futures options and various different derivatives if there could be arguments made there but this would be an academic discussion and frankly if you’re going to work in a trading floor you’re going to start with bonds and you’re going to start with various different kinds of exotic derivatives and you know fx derivatives and dealing with all

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Sorts of equities haram and halal it’s just not realistic that you’re going to be able to focus on a specific subset which is halal and you probably don’t even know what that subset is and if you do want to find out we have a sharia screening course that teaches you or you could just look at you know just google it online and find it so that’s the first thing

To say investment banking is generally speaking haram now if push comes to shove you might say oh well i’m working in risk and compliance i’m working in assurer and so whatever fancy was they use my view is that if you’re working in an investment bank then it is not still permissible because you are supporting something that is fundamentally impermissible and you

Should not be working there even as an employee i know there are scholars that would have contrary views on that and you know if you want to follow them you know be my guest but my personal view having studied the subject having interacted with people in investment banking and our friends in investment banking i met an interest of mine kahless morning you know we

Are constantly on calls with investment bankers i understand this industry and my my sincere view is that it is not something that a muslim should be doing directly however you could work for a advisory boutique in instead such as lassard’s or more listen company or mizar’s or perella weinberg or any of these kind of advisory boutiques that focus on ma because

Then you are doing an advisory service and you’re focusing on a fundamentally permissible transaction which is m&a mergers and acquisitions yeah so hedge funds if you go back to the trading you know discussion the same would apply really their hedge funds they hedge what does hedge actually mean it means that you’re trying to use arbitrage you’re trying to

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Use long and short trading techniques to try and make a gain in the market whatever happens and then you also use lots of derivatives and there’s lots of different techniques that hedge funds use all of this stuff is hugely problematic this night in perspective short you know short selling from an islamic perspective is is not permissible so that would you know

From the offset would would pose a problem then you’ve got long or lead so that’s the sell side if you want to call it that that’s the sell side where they sell you services and they sell you products then you’ve got the buy side which is the investment houses that have the money generally speaking the buy side is much more permissible but if you’re working in a

Debt fund or if you’re working in a fund that spits or or in a investment house that specifically focuses on interest then of course that wouldn’t be permissible but if you are going for like a long only fund then then i i would not have any problems with that and i think there you can actually focus in on and try and get a special ism in halal equities you know

That will be ideal but even if you can’t then you know at least you’re in you’re in the right place and you can have those conversations to steer yourself to where you need to be and fundamentally what they’re doing in these businesses is permissible they’re buying and selling equities they’re investing in in assets so i wouldn’t have a problem with that then

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In terms of private equity venture capital it’s a tricky one i would say that some venture funds are permissible to work in and some pe funds may be permissible to work in but generally speaking these these guys would not be permissible in my view solely because of the techniques that they used that they used to make this return that they make and the techniques

They use are underpinned by leverage they use leveraged buyouts they they take on debt even before they actually buy the company then once they buy the company they fill it with debt to try and to try and magnify their returns that is problematic and the whole industry is very much focused on these kind of interest based returns so i would say that’s impermissible

If you can find a sharia compliant fund then you know be my guest yeah and if you’re working in a leveraged company like any company in the uk we’ll have some level of debt especially if they’re a large you know footsie 100 type company but but in my view that is fine as long as they’re fundamentally not doing something that it that is impermissible so if you’re

Working in hsbc you know my answer to that will be obvious but if you’re working in shell then even if they do have some kind of random debt kicking around or the deal in oil futures or something like that because it’s fundamentally something that is permissible buying and selling oil well mainly drilling and then selling oil i won’t have a problem with that even

If it is leveraged i mean pretty much every company is leveraged out there

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ISLAMIC CAREER PLANNING – EP5 – IS INVESTMENT BANKING HARAM? By IslamicFinanceGuru