Is Amazon Stock Halal?

June 22, 2021

Rakaan Kayali

Table of Contents

How much of Amazon’s revenue comes from haram?

Amazon earns its revenue from the following revenue sources:

Online Stores:

Includes a wide variety of products sold directly to consumers through Amazon.com.

A portion includes media products such as books, videos, games, music, and software.

Physical Stores:

Includes Whole Foods and other Amazon Physical Stores.

Third-party Seller Services:

Amazon provides a platform for other retailers to sell their products.

Revenue from this segment includes commissions, shipping fees, and other third-party seller services.

Subscription Services:

Includes Amazon Prime memberships charged on a monthly or annual basis.

Also includes digital video, audiobook, digital music, e-book, and other non-AWS subscription services.

Amazon Web Services (AWS):

Amazon’s cloud computing platform offers on-demand technology services.

These services include computing, storage, database, and other services for start-ups, enterprises, government agencies, and academic institutions.

Other:

Primarily includes advertising Amazon provides for third parties on its site.

Also includes revenue from co-branded credit cards based on Amazon’s agreement with Chase Bank.

The contributions from each of Amazon’s revenue segments in their 2020 annual report were as follows:

Areas of concern that relate to the Amazon’s sources of revenue are alcohol sales from Amazon’s physical stores, interest earned on credit cards, and media products.

The following table shows the growth each of Amazon’s segments from 2018 to 2020 (Numbers in millions, U.S. dollars):

	Online Stores	Physical Stores	Third-party seller services	Subscription services	AWS	Other
2018	122,987	17,224	42,745	14,168	25,655	10,108
2020	197,346	16,227	80,461	25,207	45,370	21,453
Growth	61%	-6%	88%	78%	77%	112%

The “Other” category, which includes revenue generated from credit cards, experienced the highest growth.

That said, revenue from this segment is primarily generated from Amazon’s third-party advertising service and only makes up 5.6% of Amazon’s total revenue.

Amazon’s media content such as movies, music, and TV shows are not inherently haram, although depending on their content they certainly can be.

This media content is often bundled with other services that come with Amazon’s “Prime” membership such as two-day or same-day shipping. Consequently, it’s difficult to determine how much revenue is directly attributable to Amazon’s media content.

Practical Islamic Finance concludes:

It is questionable whether a material part of Amazon’s revenue comes from haram.

Does Amazon rely on interest to operate?

According to the company’s annual report for the fiscal year ended December 31, 2020 (Numbers in thousands, U.S. dollars):

Interest Income: $555,000

Interest Expense: $1,647,000

Total Revenue: $386,064,000

Total Expenses: $363,165,000

Interest Income / Revenue: 0.14%

Interest Expense / Total Expense: 0.45%

Practical Islamic Finance concludes:

Amazon is not reliant on interest for its operations.

What is Amazon’s Environmental, Social, and Governance (ESG) impact?

As can be expected with a company the size of Amazon, it has a varied set of ESG highlights.

Environment

Amazon mentions the following in its 2020 Environmental Sustainability Report:

“Amazon has 91 solar and wind projects worldwide that have the capacity to generate over 2,900 megawatts and deliver more than 7.6 million megawatt hours of energy annually.”

In addition, Amazon has made investments such as Amazon’s solar farm in Virginia and ordering 100,000 electric delivery vehicles, which began making deliveries in 2021.

Amazon considered making an option for Prime customers to have packages delivered at the most efficient and environmentally-friendly time (allowing the company to combine shipments with the same destination) but decided against it out of fear customers might reduce purchases.

It is also noteworthy that Amazon funds both climate denial groups including the Competitive Enterprise Institute and politicians denying climate change including Jim Inhofe.

Social

As it relates to philanthropy, in 2020, Amazon surpassed $215 million in donations through its Amazon Smile program since its launch in 2013.

Regarding its treatment of employees, Amazon has a relatively high Glassdoor rating of 3.8 out of 5.0 from over 82,000 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.

During the Covid-19 pandemic, Amazon distributed $500 million in bonuses to all its front-line employees and partners who were with the company in June.

In addition, Amazon established a $25 million relief fund for delivery drivers and seasonal employees facing financial hardship or quarantined during the pandemic.

That said, there has been some serious criticism of Amazon’s handling of the Covid-19 pandemic.

On November 27, 2020, Amnesty International said, workers for Amazon have faced great health and safety risks since the start of the COVID-19 pandemic. On Black Friday, one of Amazon’s busiest periods, the company failed to ensure key safety features in France, Poland, the United Kingdom and USA. Workers have been risking their health and lives to ensure essential goods are delivered to consumer doorsteps, helping Amazon achieve record profits.

Governance

Amazon’s tax affairs were investigated in the U.S., Germany, Poland, and many other countries. According to a report released by Fair Tax Mark in 2019, Amazon is the worst offender of tax avoidance, having paid an 12% effective tax rate between 2010 and 2018, in contrast with 35% corporate tax rate in the US during the same period. Amazon countered that it had an 24% effective tax rate during the same period.

Practical Islamic Finance concludes:

Amazon’s net ESG impact is questionable.

Comfort Rating

From Amazon’s business, financial, and ESG reviews, Practical Islamic Finance rates Amazon stock as:

Questionable to invest in from a Halal perspective.

Justification for our rating

While its true that Amazon has enhanced the convenience of many of our lives substantially, and much of what Amazon does is positive, there are also some aspects of the business that cannot be ignored. The accelerating pace at which Amazon is producing movies and shows many of which conflict with Islamic values is one of those aspects. Another aspect is the promotion of the use of interest-bearing debt through their extensive credit card programs. Finally, Amazon’s cut throat working environment which prioritizes competitiveness and profits over worker safety, all make Amazon a questionable investment for Practical Islamic Finance.

Did we get it right? let us know in the comments.