Is short selling permissible in Islam (Shariah Compliant)

 1. yes permissible. 

2. Explaination : Short selling involves selling shares that the seller does not own, which is generally prohibited due to bai madum (selling what one does not possess) and the element of gharar (uncertainty). However, in Regulated Short Selling (RSS), the inclusion of Share Borrowing and Lending (SBL) principles addresses the issue of gharar by increasing the probability of delivering the sold shares, making the transaction Shariah-compliant. The Shariah Advisory Council (SAC) applies the concept of istihsan (juristic preference) with maslahah (public interest) and `urf (customary practice) to justify the permissibility of selling borrowed shares. This ruling benefits the original shareholders and enhances market liquidity. Furthermore, the ijarah (leasing) concept, with the owner's consent to sell leased shares, is accepted in Islamic capital markets. Normally, selling an asset terminates an ijarah contract, but in the context of SBL, the contract remains valid due to similarities between SBL and ijarah in several aspects.

3. Legal Maxim : “When an issue that impedes (the permissibility) is removed, then the activity which was initially forbidden becomes permissible”

4. Asas : Al-Syatibi defined istihsan based on the Maliki Mazhab as accepting maslahah (public interests) that has juz’ie. (Mazhab Maliki).

5. reference : SAC resolution 2019 - page 71 - 74

Thank you Mimi for the answer and explanation.