NU board okays trade in stocks

JAKARTA (JP): The East Java chapter of the Nahdlatul Ulama (NU) has ruled that buying and selling shares is permitted under Islam.

Antara reported from Surabaya, the capital of East Java, that 20 syuriah (experts in Islamic law) of the NU regional executive board gave their approval after studying the matter and discussing it with executives of the Surabaya Stock Exchange.

This is the first time that a branch of NU, which has more than 30 million members nationwide, has publicly endorsed share transactions. Antara reported that the East Java chapter plans to recommend that the NU central executive board do likewise.

It is not immediately clear whether the ruling would unleash mass buying of stocks and a fresh injection into the Surabaya and Jakarta stock markets.

NU, whose members live mainly in rural areas, has never publicly banned its members from trading in shares, an activity that is considered to be an urban pastime.

According to Antara, the NU lawmakers ruled that the establishment of the Surabaya Stock Exchange does not contravene Islamic law.

They also ruled that buying and selling shares, either in the primary or secondary market, is permissible.

They further ruled that there must be transparency about the management and condition of companies whose shares are being listed on the stock markets, and that there must be "fairness" in the way profits, or dividends, are divided.

Imron Hamzah, the head of the lawmaking body of the NU chapter in East Java, said the legality of share buying and selling was first questioned during the NU congress in Yogyakarta in 1989.

The delay in taking a position was largely because the ulemas' knowledge about share transactions was sketchy, Imron said.

Harjo Sumitro, the director of trade of the Surabaya Stock Exchange, told a delegation of the NU regional board on Tuesday that the stock exchange regulations in Indonesia have been designed to minimize speculation.

"Abroad, share trading is highly speculative that it may be haram (religiously forbidden), because Islam bars speculation," Harjo said. "In Indonesia, we have quite strict regulations that all forms of speculation and the likelihood of fraud are eliminated."

"Any fraud is likely to occur after the transactions," he added. (emb)