SAC Benchmarks (Sharia Compliance Securities)

Ibnu Qayyim in his Bada’i` al-Fawa’id361 divided the nature of prohibited assets
into two groups:

(a) Prohibited because of its zat (nature), for example liquor, pork, etc.
This relates to the case of mixing slaughtered animals mentioned earlier;
and
(b) Prohibited due to other reasons, for example, the means by which
money is earned is prohibited. Money, in essence is not prohibited,
but if money is obtained as a result of theft, robbery, cheating, etc.;
then this money is prohibited. This is similar to the securities of a
mixed company, because securities in essence is not prohibited. It
becomes prohibited because the activities of such companies produce
profits which can be distributed through dividends.

However, it can be worn by men if the ratio of silk thread mixed with the
common thread does not exceed 50%. The benchmark concerning such a
mixture is 50%. In other words, if the mixture of silk does not exceed 50%,
the cloth may be worn by men. The question is whether such a benchmark
is suitable for application in the context of mixed securities. However, from
the viewpoint of asset characteristic, both cases are essentially similar, as
they appear to be assets that are not prohibited in essence.

The Prophet s.a.w.’s condition of 1/3 (33.33%) is a very generous limit which
can also be considered for use as the benchmark for mixed companies. This
statement can be supported by the legacy of Sa`ad Ibn Abi Waqas who
wanted to leave his assets as alms as in the following hadith:

Meaning: “One day, the Prophet s.a.w. visited Sa`ad bin Abi Waqas
who was ill. Sa`ad expressed to the Prophet s.a.w. his feelings that his
illness was entering the last phase and that death was near. He asked
for the Prophet s.a.w.’s opinion on giving his assets away as alms for
he had only one daughter to inherit his wealth. Therefore, he wished
to give as alms 2/3 of his property. However, the Prophet s.a.w. stated
his objections. Then Sa`ad asked whether he could give away 1/2 of
his property. The Prophet s.a.w. still said no. The Prophet s.a.w. then
said: 1/3 (of Sa`ad’s property to give away as alms) is enough, that too
is still too much. Verily, to leave your heir wealthy is far better than to
leave you heir impoverished and dependant on other people’s
charity.”363

Based on the Prophet s.a.w.’s words, 1/3 or 33.33% “is enough” and can be
used as a guideline for the basis of formulating a benchmark. The question
is whether this benchmark is suitable to be used for mixed companies,
because it relates to the bequest of property and giving of alms. Even so,
it cannot be denied that it can be used as a benchmark to set the upper
limit of a mixture because an amount exceeding the percentage set will
be considered excessive.

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