Professional Documents
Culture Documents
Basic Prohibitions
and Ethics in Islamic
Finance
Outline
Riba and its types
The prohibition of riba
Addressing misconceptions about
riba
Rationale for the prohibition of
riba
The prohibition of gharar
The prohibition of gambling
Ethics in Islamic financial services
Riba
Riba al Qard
Applies to a loan or to any debt regardless
of the cause of that debt (debt resulting
from a loan contract or from a deferred
payment sale)
This kind of riba is the one commonly
found in conventional banking products
Riba al Qard
Riba al Bay
Background
Condition
Money1 + Money1
Equality
Hand-to-hand (spot)
Food1 + Food1
Equality
Hand-to-hand (spot)
Money1 + Money2
Hand-to-hand
Food1 + Food2
Hand-to-hand
Money + Food
Money + Others
Food + Others
Others + Others
Argument
For example, if one sells to the poor, the most that can be
said is that some concession should be accorded on
humanitarian grounds, but one cannot say that the profit
derived is haram
A trader deserves reasonable profit for his investment
and labour
Profit is the traders means of earning his livelihood
1.
2.
Anti-productive
Inflexibility in a loss situation leads to
bankruptcies loss of productive potential
and unemployment
Non-possession of object
E.g. Selling item owned but stolen
Permissibilit
y in Islam
Risk (Ghurm)
Gharar
Allowed in Islam, as
per Islamic legal
maxim Al ghurmu bil
ghunmi (no risk no
gain)
Unnecessary,
avoidable,
intentionally created
Common
Risks of trading, doing
day example business, making
investments
Effects
Encourage
entrepreneurial spirit
and productivity