Is IBM (IBM) Halal to invest in?
Table of Contents
How much of IBM’s revenue comes from haram?
IBM earns its revenue through the following segments:
- Cloud & Cognitive Software:
Includes revenue generated from IBM’s cloud software services which include Cognitive Applications, Cloud and Data Platforms, and Transaction Processing Platforms.
- Global Business Services:
Includes revenue generated from business consulting services specifically for AI and cloud applications.
- Global Technology Services:
Includes revenue generated by IBM’s comprehensive IT infrastructure and platform services.
- Systems:
Includes revenue generated from the sale of system hardware and operating software.
- Global Financing:
Includes revenue generated from payment plans and loans used to purchase IBM products and services.
- Other:
Includes income generated from intellectual property and licensing as well as other smaller revenue sources.
The contributions from each of IBM’s revenue segments in their 2020 annual report were as follows:
An area of concern for Practical Islamic Finance is IBM’s “Global Finance” segment which consists of interest-bearing payment plans and loans. This segment represents 1.5% of IBM’s total revenue. This percentage has not dramatically increased in recent years but investors will have to monitor this percentage closely to see if it grows as time progresses.
Practical Islamic Finance concludes:
Only a non-material portion of IBM’s revenue comes from haram.
Does IBM rely on interest to operate?
| Year-to-Date for period ended 6/30/2021 | Fiscal year ended 12/31/2020 | Fiscal year ended 12/31/2019 | |
|---|---|---|---|
| Interest Income | $25,000 | $105,000 | $349,000 |
| Total Revenue | $36,474,000 | $73,620,000 | $77,147,000 |
| Interest Expense | $562,000 | $1,288,000 | $1,344,000 |
| Total Expenses | $34,017,000 | $68,983,000 | $66,981,000 |
| Other Income (Net) / Revenue | 0.07% | 0.14% | 0.45% |
| Other Expense (Net) / Total Expense | 1.65% | 1.87% | 2.01% |
Practical Islamic Finance concludes:
Riba is used but not relied upon in IBM’s operations.
What is IBM’s Environmental, Social, and Governance (ESG) impact?
Environment
According to IBM’s environmental report, 59.3% of the electricity used in their global operations comes from renewable sources.
IBM reduced CO2 emissions by 56% from the year 2005. In addition, in 2020, the company recycled 96% of its product waste.
IBM also has numerous environmental research initiatives utilizing their AI infrastructures like ProMare which is an AI marine research program and their PRISM program designed to analyze plastic waste and reverse its environmental impacts.
Social
IBM has a Glassdoor rating of 4.0 out of 5.0 from over 79,000 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.
Governance
No notable governance highlights.
Practical Islamic Finance concludes:
IBM has a net positive ESG impact.
Comfort Rating
From IBM’s business, financial, and ESG reviews, Practical Islamic Finance rates IBM stock as: