Professional Documents
Culture Documents
Course
Islamic Capital Market & Instruments
By
Dr. Uzair Albazi
Associate Professor
GIFT University, Gujranwala
=================================
=====
Ph: 042 37568430 / Mob: 0301-8749911
www.alqalamfoundation.org
2
VS
Topic 04
Major Principles of Islamic Economics, Commerce, Buss & Trade
Topic 05
Verses of Holy Qur'an, Ahadith, Islamic Jurisprudence, Terms &
Conditions
3
Conditions)
Topic 20
Sallam, Istisnaa (Rules, Conditions)
6
Program Description
(Islamic Banking, Capital Market):
Program Description (Islamic Banking, Capital Market & Finance):
The program aims to produce specialists in the discipline, well-versed in both the
practices;
analysis of Islamic structured products, regulation and supervision;
strong foundation in Islamic Finance, Economics and Islamic Law;
generates capability to concentrate on the major field of interest, its types, Trading and its
practices in the current market from Islamic perspectives;
develops innovative skills to handle independent projects of Islamic Capital Market &
Finance
The aim of the course is to provide in depth knowledge and understanding of Islamic
Banking & Finance System. The course will further focus on the current practices in
business, Trade and banking and their comparison with Islamic practices. This is a research
oriented course with a purpose of developing key concepts of Islam in regard to finance,
business, Trade and banking. At the end of the course, the students will be able to
distinguish between Islamic and Un-Islamic finance, banking & business practices.
8
Reference Books
Islam Ka Qanoon-e-Tijarat
Reference Books
Islam Ka Muashi Nizam
by Dr. Noor Mohammad Ghaffari
___do___
Kuliyaat-e-Iqbal (Political & Islamic Welfare Thought)
___do___
Sikkay Ke Tareekh (History of Coin)
Dairat ul Muarif
10
Reference Books
Central Banking
Commercial Banking
Practice of Banking
by DeCock
by Prof. Sayers
by Sheldon / Tannan
11
Reference Books
SBP Act
Banking Companies Ordinance
Banking Recovery Laws
Principles of Islamic Financing
Tariqullah
SBP
SBP
SBP
12
Reference Books
Suud
Bahishti Zewer
Targheeb-ul-Muslimeen
13
Reference Books
Masla Suud
Mufti Shafi rt
14
Web Sites
www.statebank.org
www.islamcity.com
www.islamonline.com
www.lariba.com
www.islamicbanking.com
15
Purpose:
To Eliminate Riba (Interest) based and Un Islamic
Transactions from the current Banking, Economics, Finance
and Trade Sectors
16
(ref: Ibn Sad, Tabqaat. Vol 3, p. 131, Zikr Abu Bakr rt)
Yemen.
Boomi & Aghost. Downfall started during the time of Scissor Tabeer. Late
King Terajohn, Mark and Bill tried to strengthen their Grip on International
Economy but failed)
Then Arab areas (Makkah during the Hajj, Madina and Taif for Farming
Products) become the Focus and the Center of International Trade
due to:
Peaceful atmosphere
Rich Arab Culture
Strong Religious feelings & Attachments of public for those areas
History:
These journeys started by great grandfather of Prophet Pbuh,
Dirham:
Humari Coins:
Rital;
Nash:
1916, p. 264
Hotels
Lower portion to keep the luggage of Passengers
Upper to Reside & Rest
Ahkaam-ul-Buyu
Definition of Bai:
Dealing / Exchange of goods
Buying & Selling
Rukun:
Ahkaam-ul-Buyu
Arkaan / Conditions of Bai:
Ijaab-o-Qubool
(This is the only Rukun according to Ahnaaf. The remaining three
are Conditions but the rest of Imams considered the remaining
three as Arkaan also)
Seegha
(wordings of Ijaab-o-Qubool)
(Product or Saman/Price)
Ahkaam-ul-Buyu
The last three had two types each:
Aaqid
Ijaab
Qubool
Seller
Buyer
Maqood Alaih
Ahkaam-ul-Buyu
Conditions of Those Six Arkaans:
Ijaab-o-Qubool & Seegha
Wording of Ijab-o-Qubool like (I sold / or I bought). (Past
Ahkaam-ul-Buyu
Aqideen (Buyer & Seller)
Muture / Adult
Wise
Without Makrah
(Free Will)
Ahkaam-ul-Buyu
Bai Makrah
(Bai by Force):
Definition
Masail
Aqd Tuljiah
Definition / Details
Ahkaam-ul-Buyu
Maqood Alaih
It has two types:
Mabeea
Saman (Price)
Conditions of Mabeea:
Existence of good/product/item
Ownership
Halal Product
Product must have a price in the market
Qualities, Quantity and Details of Mabeea must be
clearly defined
Ahkaam-ul-Buyu
Conditions of Saman:
Price / Saman must be clearly mentioned
Ahkaam-ul-Buyu
Types of Bai:
Ijab-o-Qubool
Types of Bai
Bai Nafiz or Bai Qatee:
If the possession is taking right after the Ijab-o-Qubool,
Bai Batil:
Bai of any Haram Product. But it is OK for Non Muslims
Types of Bai
Mabeea:
It has four different types:
Bai Muqayizah:
Bai of Exchanging Goods with Goods (Barter System). In
that case, one will be the Mabeea, other will be Saman.
Bai Saraf:
Bai of Exchange of Currency with Currency. The
individuals of this Bai are called Sarraff. (e-g): Money
Exchangers.
Bai Salam:
Another name of this Bai is Bai Sallaf. A Bai in which
the Advance payment is taken for Mabeea, which will
be provided in the future.
Bai Mutlaq:
When any product is sold on cash to cash or cash to
credit, it is called Bai Mutlaq.
Types of Bai
Price or Business Profit or Loss:
Bai Musawamah:
Cash Sale
Bai Murabaha:
Bai Tauliyah:
Bai Al Zaiah:
INTERNATIONAL OVERVIEW
Global Research Estimations:
Number of Islamic Institutions:
300
Islamic Deposit Pool
US$ 600 B.
Islamic Assets Pool
US $ 365 B
Islamic Financial Investments
US$ 900 B
(Sukkuk, Mutual Funds, TFCs, etc.)
Average Annual Growth Rate ranges between 20-25%
Number of Countries :
48
47
INTERNATIONAL OVERVIEW
MAJOR COUNTRIES HAVING ISLAMIC BANKING
INSTITUTIONS
MUSLIM COUNTRIES:
48
INTERNATIONAL OVERVIEW
Cont/d
MAJOR INTERNATIONAL CONVENTIONAL
49
ISLAMIC BANKING IN
PAKISTAN
Developments in SBP:
Has already announced a scheme in January 2003 for
50
2)
51
investment outcome.
5)
52
Holy Quran
Hadith (Sunnah)
Ijma of Ummat
Fiqh (Islamic Jurisprudence)
53
Riba
(Interest)
54
RIBA
(Interest)
The
55
RIBA
(Interest)
RIBA
(Interest)
57
RIBA
(Interest)
Those who devour Riba shall rise up before Allah like men whom
Shaitan has demented by his touch: for they claim that trading is
like usury. But Allah has permitted trading and forbidden usury. He
that receives an admonition from his Rabb and mends his ways may
keep what he has already earned: his faith is in the hand of Allah.
But he that pays no heeds shall be among the people of fire and
shall remain in it forever.
Al-Baqarah 275 (Fourth Revelation)
58
RIBA
(Interest)
Allah has laid His curse on Riba and blessed charity with
increase. He bears no love for the ungrateful sinners
Al-Baqarah 276 (Fourth Revelation)
59
RIBA
(Interest)
O you who believe, Fear Allah and give up what remains of your
demand for interest, if you are indeed a believer. If you do not, then
you are warned of the declaration of war from Allah and His
Messenger, But if you turn back you shall have your principal. Deal
not unjustly and you shall not be dealt with unjustly.
Al Baqarah 278-279 (Fourth Revelation)
60
RIBA
(Interest)
Al-Baqarah 278-279
If you are indeed believers: Prove your claim with your deeds
and actions.
Threat in the strongest words: Not used for any other crime.
Principle amount should be paid back.
Islam emphasis on justice: Deal not unjustly and you shall not
RIBA
(Interest)
What is Riba:
Riba means any excess compensation over and above
62
RIBA
(Interest)
Riba Selected Ahadith
By Hazrat Jabir ibn-e-Abdullah (RT): The Prophet peace
63
RIBA
(Interest)
Riba Selected Ahadith
By Hazrat Amr bin Al Aas (RT): When interest based
him said,
There will certainly come a time for mankind when
everyone will take Riba and if he does not do so, its
dust/smoke will reach him.
(Abu Dawood, Ibn
Majah)
64
RIBA
(Interest)
The prohibition of interest is not limited to Islam,
65
RIBA
(Interest)
Hadith prohibiting Riab-al-Fadl
(RT)
Sell gold in exchange of equivalent gold
Sell silver in exchange of equivalent silver
Sell dates in exchange of equivalent dates
Sell wheat in exchange if equivalent wheat
Sell salt in exchange of equivalent salt
Sell barley in exchange of equivalent barley
(Reported in Muslim)
66
RIBA
Definitions:
Imam Abu Bakr Jassaas Razi (rta):
that kind of loan where specified repayment period
67
TYPES OF RIBA
Al-Nasa (Al-Nasiah) or Riba-al-Jahiliya
Al-Fazal or Riba-al-Bai
68
TYPES OF RIBA
Interest (Commercial Interest):
Interest paid on loan taken for productive and profitable
purpose.
69
TYPES OF RIBA
E-g: Commercial Riba:
Dealing of Banu Amar & Banu Mughira
Riba
Time of Revelation:
Incident of Banu Saqeefs family Banu Amar bin Umair
RIBA
(Interest)
Al-Baqarah 278-279
If you are indeed believers: Prove your claim with your deeds
and actions.
Threat in the strongest words: Not used for any other crime.
Principle amount should be paid back.
Islam emphasis on justice: Deal not unjustly and you shall not
Riba
Hind Bint Utbah & wife of Abu Sufyan rt Loan from Bait ul Maal:
visited Iraq for Jihad and on the way back, Abu Musa Ashari rt
(Governor of Basra) gave them some amount to deposit into the
Bait ul Maal of Madina on their way back. They made a Business
with it and made some profit as well. Umer took all profit from
them but upon the opinion of other Sahaba, half of the profit
were given back to them and the rest half was deposited in the
Bait ul Maal.
(Imam Malik, Al MUatta, P: 285)
Riba
Quran strickly forbids all kinds of RIBA
Examples:
Jews of Madinah
Ansars dealings of interest with Jews for agricultural
purposes
Merchants of Makkah
74
Riba
Muslim Khilafah
Loans from Bait-ul-Maal
Business dealings of Sahabas among themselves
75
Riba
LAWS BY ALMIGHTY ALLAH:
Quranic Laws & Principles:
77
ISLAMIC BANKING
History:
Zubair bin Awam rta
Usman bin Affan rta
Bait-ul-Maal
Caravans of Makkah
Imam Abu Hanifa
78
79
Bank Accounts
80
Islamic Banking
Accounts
81
Economics
What is Economics?
To utilize the limited resources in a way that maximum
needs
and wants are met to ensure the well being of all
members of
the human society.
82
Economics
Problems Faced by Economy:
Determination of Priorities
Allocation of Resources (land, Labor, Capital, Entrepreneur)
Distribution of Wealth / Income
Development
83
Determination of Priorities
(Problem 01)
Capitalism
Socialism
to participate in any
business independently.
interest.
84
Allocation of Resources
(Problem 02)
Capitalism
Market force will decide
Socialism
allocate resources
85
Development
(Problem 03)
Capitalism
Socialism
Govt. will decide
86
Distribution of Income
(Problem 04)
Socialism
Capitalism
Land
Labor
Capital
Entrepreneur
Profit
Rent
Wages
Interest
-
Govt.
87
Right to Wealth
Capitalism
Right to wealth is with the
Socialism
Right to wealth with the
88
Flaws of Capitalism
No bindings / restrictions while maximizing profits.
Blindly follows market forces that creates exploitation of
89
Flaws of Socialism
The other extreme of not even giving the natural
freedom.
Perfect planning is assumed to be the Cure of all ills.
Govts. are assumed to be the angels which cant commit
a deliberate mistake.
Can not work without a forceful dictatorship.
Creates overall inefficiency in the society. There is no
Economics
Capitalism:
Freedom of business
Law of supply & Demand helps
Resources (land, labor & capital) will be used
Competition will force to improve, create and gain
maximum.
Distribution of wealth among producers of wealth only
(law of supply & demand will help to decide their share)
91
Economics
Producer of Wealth:
Land
Labor
Capital
Owner
will
will
will
will
get
get
get
get
Rent
Wages
Interest
Profit
92
Economics
Socialism:
No Freedom
No Private Ownership
Govt. will decide about
Allocation of Resources
Determination of Priorities
Distribution of Income
Development
93
Economics
Principles:
Collective Property
Planning
Collective Interest
Equitable distribution of Income
94
Economics
Islam:
Everything belongs to Allah
Private ownership is accepted
Some restrictions applied to run your economy
Law of supply & demand is accepted
95
Economics
Restrictions:
96
Economics
Direct Producer of Wealth:
Land
Labor
Capital
Through
Owner
Rent
Wages
(Not Interest) Profit & Risk of Loss
Musharikah & Mudahiribah
Profit or Loss
97
Economics
If everything belongs to Allah, then He decides to share your
Zakaat
Khiraaj
Ushr
Sadaqah
Kaffarah
Sacrifice / Qurbaani
Wirasaat
98
-Govt. restrictions
-Moral values
99
Terms
Definitions:
Bai
Mabeea
Saman
Qadar
Price
Ijab
100
Terms
Tarkah
Dain
Madyun
Daiin
Muzarib
Rab-ul-Maal
Rasul Maal
101
Islamic Concepts
Legal Person
Shares
Under Writing
Limited Company
Kick Back
Roll Over
Libor / Kibor
102
Types of Bai
(according to validity)
Definitions:
Bai Sahih
Bai Batil
Bai Fasid
Bai Mauqoof
103
Contract (Aqd)
Subject Matter (Mabeea)
Price (Saman)
Possession or delivery (Qabza)
104
Possession
(Qabza)
Bai Sahih
(Valid Sale)
Subject
Matter
(Mabeea)
Price
(Saman)
105
Conditions of Contract:
Sale must be non contingent
Sale must be immediate
106
Existing
Valuable
Usable
Capable of ownership / title
Capable of delivery / possession
Specific & Quantified
Seller must have title & risk
107
Quantified (Maloom)
108
Physical (Haqiqi)
Constructive (Hukmi)
109
Note:
Exceptions are:
(1) Bai Salam
(2) Bai Istisna
110
Sale Agreement
111
the market
than Haram
112
113
Modes of Financing
Musharakah
Mudharibah
Murabahah
Ijarah (Lease or Hire)
Ijarah Wa Iqtinah (Hire-Purchase)
Bai Salam
Bai Istisna
114
Modes of Financing
Musharakah:
It is the same financing contract as Modarabah except that
client also provides a part of capital in addition to
management participation. On the other hand, Islamic bank
may also contribute in the management in addition to its
capital. In that case, management fees and distributable
profit form the enterprise are shared by the client and
Islamic Bank in accordance with ratios fixed under the
Musharakah contract.
115
Modes of Financing
Modharibah:
Modaribah is a contract between an Islamic Bank and the
client whereby the Islamic bank provides specific amount of
funds to the clients for an enterprise for defined purposes
in exchange for a reasonable and highly predictable profit.
The client receives a share in the profit as compensation or
fee for his management.
116
Modes of Financing
Murabahah:
Under this deal, Islamic Bank purchases goods, raw
material, equipment, machinery or any other items of
economic significance from a third party at the request of a
client and sells such goods to the client on spot or deferred
payment basis at it s own sale price. The difference
between the purchase cost of the Islamic bank and the sale
price to the clients forms the profit called Mark Up.
117
Modes of Financing
Ijarah (Lease or Hire):
The bank acquires machinery /equipment, building etc for
his client and charges a certain rental for their use.
Modes of Financing
Bai Salam:
Seller undertakes to supply specific goods to the buyer /
bank at a future date in exchange of an advanced price fully
paid at the spot of agreement.
Purpose:
-To meet the need of small farmers who need money to
grow their
crops and to feed their family up to the time of harvest.
-To meet the need of traders for import and export of goods.
119
Modes of Financing
Bai Istisna;
The Bank enters into an agreement with the client for
purchase of any goods before it comes into existence.
It is an order to producer to manufacture a specific
commodity for the purchaser.
120
121
of agreement
Profit sharing ratio must be based on the percentage of
122
sleeping partner.
123
partner
must be equal according
to the percentage of their investment.
124
Dissolving Musharakah
125
Muzaribah:
Holy Quran:
O Believers, when you make any deal of Loan for some
certain time, write it down.
(Al Baqarah, 2: 282)
Shirkat-e-Mufawazah:
It is that type of Partnership, where all the partners are
Holy Quran:
And there are some people, who walks on the ground (earth)
Muzarib. Therefore, if loss occurs in the business, Rab-ulMaal cant demand for the recovery of his investment from
Muzarib.
In Muzaribah, the position of Muzairb is like the custodian of
the investment of Rab-ul-Maal. Therefore, he is always
bound to take the suggestions, advice, permission of Rabul-Maal in making decisions.
Muzarib is not allowed to take any salary from the business.
If he is traveling outside, he is allowed to take the daily
traveling wages / allowance and other cost etc. According
to Imam Abu Hanifa, he is also allowed to take medical
charges from the business in case of sickness.
Muzarib will get his profit share only. If he crosses his limits
of the agreed agreement of Muzaribah, he will be
responsible/liable for all loss/liabilities.
Muzarib will always divide the share of the profit in the
presence of Rab-ul-Maal. It is the opinion of all Imams.
MUZARIBAH
Features of Muzaribah:
Investment from (one party) Rab-ul-Maal only.
No participation in business or management
All loss must be suffered by Rab-ul-Maal only.
Rab-ul-Maal must carry all liabilities of Business
All assets will be the property of Rab-ul-Maal
137
MUZARIBAH
MUZARIBAH AL MUQAYYIDAH:
-Investment for a specified business only
MUZARIBAH AL MUTALLAKAH:
-Free option to do any business
138
MUZARIBAH
NOTE:
All four Imams agree that no salary will be given to Muzarib
on his/her services.
given only,
if the Muzarib travels out of town.
139
Murabihah
Features:
Basically, its not a mode of financing but a source to avoid
140
Murabihah
141
Murabihah
142
Murabihah
(Agreement)
Liability of Client
143
Murabihah
(Agreement)
Bank
&
Client
Client
&
Bank
Wakeel
&
Bank
Bank
&
Wakeel
Wakeel
&
Seller
144
Types of Bai
Bai Salam:
It is also called Bai Salaf. In that Bai, Mabeea is
confusion/disputes.
Types of Bai
Bai Salam (Cont)
Conditions:
Condition of Aqd:
Conditions of Ewaz:
Two Categories
Conditions of Ras-ul-Maal
Conditions of Musallam Feeh
(6 conditions)
(10 conditions)
Ahkaam-ul-Buyu
Conditions of Ras-ul-Maal
(6 conditions):
Ahkaam-ul-Buyu
Conditions of Musallam Feeh (commodity): (10
conditions)
sacks etc.
Date of Delivery (minimum delivery time, is one month)
Muheeth)
(Ref: Al
Ahkaam-ul-Buyu
The commodity for which the Bai Salam is done, must
Ahkaam-ul-Buyu
Musallam Feeh (cont):
Ahkaam-ul-Buyu
Changes in Mabeea before Possession:
Q: If a purchaser wants to resell a commodity/product
Ahkaam-ul-Buyu
Moveable Goods:
Hadith:
Ahkaam-ul-Buyu
Ahkaam-ul-Buyu
If the goods are in weight or in sacks etc, and the purchaser gets its
Hadith:
According to the Hadith of Prophet pbuh, He has prohibited the
reselling of crop without re measuring. (weight age of seller & then
weight age of purchaser for reselling)
(Sunnan Ibn Maaja, Kitab-ul-Buyou)
Ahkam-ul-Buyu
If Mabees is such a commodity which needs to be counted in
Ijarah
Features:
Lessor stays as owner and the lessee has the right to use
the item/good.
156
Ijarah
157
Salam
Conditions:
It is necessary to pay the lump sum amount in the
quantified or measured.
qualities.
mentioned clearly.
158
Istisna
Features:
Not necessary to pay the amount in Advance like Bai Salam
Price must be decided in the beginning of the contract
Qualities, features of that product must be clearly
identified
159
Istisna
Canceling Istisna:
one party can cancel the Istisna deal by giving notice to the
160
Difference between
Istisna & Salam
Istisna
Istisna is permissible for any
not necessary.
Salam
But in Salam, it could or
In Salam, it is necessary to
make full payment in
advance.
In Bai Salam, it can not be
cancelled one sided.
have to be fixed.
Project Financing
Proposed Methods:
Musharikah
Mudharibah
Basic Principles:
Financing through Musharikah and Mudharibah does not
mean the advancing of money. It means participation in the
business in the case of Musharikah, sharing in the assets of
the business to the extent of the ratio of financing.
An Investor must share the loss incurred by the business to
the extent of his financing.
The partners can determine with mutual consent any ratio of
profit which may differ from the ratio of investment. However
the partner who has excluded himself from the responsibility
of work for the business cannot claim more than the ratio of
his investment.
162
Project Financing
Project Financing:
If the financier wants to finance the whole project, the
163
Project Financing
The distribution of profits according to the normal accounting
the other party wants to continue the business, the later can
purchase the shares of the former at an agreed price. In this
case, the financier may get back the amount he has invested
along with a profit, if the business has earned a profit.
164
Project Financing
Since financial institutions do not normally want to remain
If the sale of the share on one time basis is not feasible for
project is reduced to that extent, and when all the units are
sold, the financier totally comes out of the project.
165
Import Financing
Import Financing:
Conventional Banks charge two types of fee for the
166
Import Financing
167
Import Financing
Musharikah:
The appropriate substitute for LC is Musharikah. Bank and
importer can make an agreement of Mudharbah or Musharikah
while opening LC. If LC is being opened at zero margin then an
agreement of Mudharbah can be made, in which bank will
become Rabb-ul-maal and importer will be regarded as Mudarib.
Bank will own the goods that are being imported and profit will
be distributed according to the agreement.
If LC is being opened at some margin then Musharikah
agreement can be made. Bank will pay the remaining amount
and the goods that are being imported will be owned by both of
them according to their share of investment. Bank and importer,
with their mutual consent can also include a condition in the
agreement, whereby, Musharikah or Mudharibah will end after a
certain time period even if the goods are not sold. In this case,
importer will purchase the banks share at the market price.
168
Import Financing
Murabihah:
169
Murabihah
(Agreement)
Bank
&
Client
Client
&
Bank
Wakeel
&
Bank
Bank
&
Wakeel
Wakeel
&
Seller
170
Export Financing
Two important roles of bank in Exports:
They act as a negotiating bank and charge a fee for this
171
Export Financing
Pre Shipment Financing:
Pre Shipment Financing can be fulfilled by two methods:
Musharikah
Murabihah
Musharikah:
Bank & Exporter can make an agreement of Musharikah
or Mudharibah, if exporter is not investing, otherwise
Musharikah agreement can be made. Agreement in this
case will be easy, as cost and expected profit is known.
Exporter will manufacture or purchase goods and profit
that will be obtained by exporting, will be distribute
between them according to the pre determined ratio.
172
Export Financing
Problem:
If the exporter is not able to deliver the goods according to
Solution:
it can be rectified by including a condition in Mudharibah or
Musharikah agreement that if exporter violates the terms and
conditions of import agreement then the bank will not be
responsible for any loss which arises due to this negligence.
This condition is allowed in Shariah as the Rabbul Maal
is not responsible for any loss that arises due to the negligence
of Mudharib.
173
Export Financing
Murabihah:
Murabihah is being used in many Islamic Banks for export
Export Financing
Post Shipment Financing:
It is similar to the discounting of Bill of Exchange. Its
175
Export Financing
Here two procedures and
two different agreements will be made.
One will authorize the bank to collect the loan on his
Loan / Credit
Loan / Credit:
Business is always in need of give and take of loan or credit
dealings. According to Islam, there is no room for charging
interest on Loans. Because poor & week will always be in
need of some favors from each other and it is not allowed
to take the advantage of some ones need
Islam has set few instructions for both Lender & Borrower:
Instructions / Teachings for Lenders
Instructions / Teachings for Borrowers
Loan / Credit
Teachings/Instructions for Lenders:
Islam emphasis, when you lend to your brother and if he is
in crisis, you should give him more time to pay your debts.
And if he is not capable to pay you back neither any hope in
the future then you are demanded to forgive him (and
expect reward from Almighty Allah).
Holy Quran:
then grant him time till it is easy for him to repay, but if you
remit it by way of charity, that is better for you if you did
but know.
(Al Baqarah, Chp:3: V: 280)
Loan / Credit
Hadith:
The one who wants that Allah save him from the
Loan / Credit
Hadith:
Loan / Credit
It is also stated in many Ahadith that Prophet pbuh
(Bukhari, Kitaab-ul-Buyu)
Loan / Credit
Instructions / Teachings for Borrowers:
Islam also forces borrower to pay his loan/debts full and on
time unless there is any genuine excuse. Otherwise he will
be responsible in the sight of Allah.
Borrowing and Lending is actually an agreement between
Holy Quran:
Loan / Credit
If the borrower does not pay his debts without any reason /
Hadith:
(Agreed Upon)
Loan / Credit
Hadith:
Conclusion:
This Islamic Financial System, provides:
Benefits to Poor
Service & Flexibility to Rich
Loaning Facility to every Individual
Financial Security to the Lenders
Security Guarantee by State
Smooth running of the Financial & Economic System
Loan / Credit
Prophet pbuh called the debt of a person an unforgivable
(Muslim, Kitaab-ul-Buyu)
Loan / Credit
Loan / Credit
Hadith:
Prophet pbuh for his loan and he talked harshly with him. The
companions of Prophet pbuh tried to teach him some manners.
Prophet pbuh said, leave him alone. He has the right to talk.
Buy a camel for him. Companions rt said, O Prophet of Allah,
we are capable to get a better camel in age than this. He
replied. Ok. Get a better one and give it to him. The best
among you is he, who pays back good.
(Muslim,
Kitaab-ul-Buyu)
Loan / Credit
Hadith:
Loan / Credit
Hadith:
Loan / Credit
Hadith:
thanking the lender for his favor while returning your loan.
Loan / Credit
Rahan (Security):
Islam allows the lender to demand for a Rahan (security) from
the borrower before giving any loan.
Terms & Conditions:
Major conditions of Rahan are as follows:
The Profit & Loss of the Marhona (Pledged) thing is the
Loan / Credit
Hadith:
Pledged/Secured thing can not stop its owner. For him, there are
benefits and there are losses as well.
(Mishkat, by Imam
Shafi ra)
This Hadith shows, that the taxes or if there is right of other in this pledged
Loan / Credit
Taking benefits from those pledged animals are allowed
Loan / Credit
Bankruptcy: If a person files the bankruptcy due to his sever
financial crisis. Scholars have mentioned few laws for that
Bankrupt. Which are summarized below:
Bankrupt can be set free from his debts/dues due to filing the
bankruptcy. Court will recover the dues for the lender even by
selling his property.
Hadith: it is narrated by Abdur Rehman bin Kaab bin Malik rt that Muaaz
rt was a very charitable young person. He did not keep savings. He use
to take loans for charities until his whole wealth/property was pledged.
He came to Prophet pbuh and requested him to talk to the lenders. If the
lenders would be able to forgive Muaaz rt but they did not do so. Then
Prophet pubh started selling out his stuff/goods for the lenders until
Muaaz rt stood up empty handed.
(Mishkaat)
it back. E-g:
becomes bankrupt and the lender sees his real good with him. He
has the most right to get it back.
(Agreed Upon)
If the lenders are more than one, then the court can take the assets
pbuh, one person bought fruits and made loss in it. He became
bankrupt. Prophet pbuh addressed the people to pay him sadaqah.
People paid sadaqah to him. But it was not sufficient to pay his
debts in full. Then Prophet pbuh said to the lenders, take what you
get and nothing you will get more than this. (Muslim)
Loan / Credit
If the person gets bankrupt, then all the assets, he keeps in
Hadith:
and investments
199
Risk Aversion
Assuring others
Risk sharing
Q:
What is wrong with the practice?
Ans:
The contract between the insurer and the
insured is
technically wrong from the Shariah
perspective because of:
Gharar & Riba
200
contract
The insurer does not know how much he would owe to an
individual.
Indirect Riba
202
203
The share holders create a waqf fund to extend the help to those who
want to cover against financial loss. The participants contribute to
the fund and the operator manages the fund. All under writing
results belong to the fund which itself has a legal entity.
204
Pricing
Price setting (Taseer) is prohibited according to all Imams/scholars.
According to Hanabala, famous scholars like Shamsuddin abul firaaj Abdul
Rehman bin Abu Bakr writes :
The ruler has no right to decide the prices for the products of
It is not appropriate for the ruler to bound the public on controlled prices
because Prophet pbuh said, do not decide prices because Allah decides it,
He creates ease and difficulties and He sustains. And also that, information
of price is the right of the seller therefore, only he can decide it and state
should not interfere in their rights. But if for the purpose of public benefit,
it is required, then is acceptable. If the merchants start charging higher
price of basic needs items and the judge can not defend the benefits of
public but by fixing the state controlled prices of those items then with the
opinions of other skilled and experts, it is allowed.
(Al Hidaya,
Baab Al Karahiya)
Masail of Profit
Ghaban-e-Fahish:
It means invalid profit. Islam does not restrict the limit
Masail of Profit
Q:
Q:
for Ghaban-e-Fahish.
Masail of Profit
Shafi school of thought has the same opinion.
According to Maliki school of thought, Ghaban-e-Fahish
Masail of Profit
Summary of Ghaban-e-Fahish:
Profit must be limited within the normal buying and
Safe/Protected Trade
Holy Quran:
nor leave him alone to offensers and the one, who fulfill the
need of other brother, Almighty Allah will fulfill his needs on
the day of Judgment. (Agreed Upon)
(Agreed Upon)
and caring just like one body. When one part hurts, the
whole body suffers in pain and awakening is alike.
(Agreed Upon)
Holy Quran:
mentioned:
Certainly, Allah swt and His Apostle has forbidden the trade of
Zakat
Zakat:
Islam has kept the share of poor and needy in the wealth of
Rich. This will be paid as a duty and amanat of poor but not
as a favor to them. It was ordered in the 2 nd year of Hijra.
Ghuruz at Tijarah =
Commercial Goods
Commercial Goods:
Islam also orders to pay zakat not only on the cash savings
Zakat
Nisab of Commercial Goods:
Same Nisab as of Cash
One Lunar calendar must be passed
Gold 7.5 Tolas
Silver 52.5 Tolas
Or equivalent of cash
1/40 th part will be given as Zakat
All Imam agree that zakat is also due on commercial
goods
Zakat
Quranic References:
Verse:
Mujahid rt that In this Ayat, Clean and pure Maal which you
earn through hardworking means the earnings through
business. Hasan Basri rt, Imam Razi rt have the same
opinion in this regard.
(Tafseer Tabri, Surat ul Baqara, V: 267)
Zakat
Hadith:
him use to order us that we must take the zakat out from our
commercial goods.
(Dar ul Qutni, V:2, P: 376)
Zakat
Zakat
Zakat
Important Masail of Zakat:
Zakat is due on commercial goods only.
If the goods are purchased for personal use and then planned
to sell them out. It will be counted as commercial goods then
but the calculation time will start from the day, it will be
practiced.
No zakat is due on machinery, building, houses, equipments,
furniture etc
Zakat will be due on the rent received after a whole lunar
calendar is passed.
Zakat will not be due on the machinery of factories or mills
but on the manufactured goods as well as on raw material.
Zakat will be due on shares after the whole lunar calendar is
passed.
If some one has cash, gold, silver and commercial goods all
together. He will make the appraisal of all of them and will
pay the zakat at the end of the year. This is the opinion of
Imam Abu Hanifa rt, Imam Shafi rt, Imam Ahmed bin Hanbal
rt and Imam AuzaiI rt.
228
Sources
Major Sources:
Holy Quran
Hadith
Ijma
Fiqh
229
Evidences
Permission of Business In Islam:
Through Holy Quran
Through Ahadith of Prophet pbuh
Companions of Holy Prophet
Four Caliph of Muslims
Ashara Mubasharrah
Muhajreen of Makkah
230
231
Examples:
Zabiha and Non Zabihah
Muslim And Non Muslim
232
Duties of Muslims
Duties of Muslims in Business World
Verses of Holy Quran
e-g:
Oil
Gold
Man Power
Land
233
Forbidden Earnings
Definition of Haram Earning
Verses of Holy Quran
234
Forbidden Earnings
Ahadith of Holy Prophet pbuh:
235
Forbidden Earnings
Details of Forbidden Earnings:
Stealing
Robbery
Swearing
Offense
Lies
Cheating
Unjustly
Haram Business
236
237
238
240
Salam)
No selling of goods without owners permission
242
Forbidden Business
Wine
Pig
Dead Animals & Birds
Interest Based Business
Lottery
Stolen Products
Business in Masjid
243
Forbidden Business
Deal Upon Deal
Idols/Pictures of Living Beings
Unavailable Products
Selling Products without permission
244
Summary
Business Ethics in Islam
Verse of Holy Quran
245
Summary
Four Major peaces of Advice:
246
The End
Thank You
247
Quizz # 1
Q: Write the names of the Business
248
Quiz # 1:
Musharikah ?
249
Quiz # 2:
250