Al - Quran and Sunnah are the main
sources of Islamic Commercial law’s. The elemens that are prohibited from the
begining of the contract are:
- Riba (Usury)
- Gharar
- Maysir
- Prohibited Sales (Haram Goods)
Riba (Usury) : Literaly means EXCESS, technically it refers to
extra guaranteed amount paid or received (over and above the principal in a
loan transaction) or in exchange of a commodity. A fund provider cannot claim a
certain fixed rate of interest irrespective of the performance of the
investment. The borrowed money would have to be invested and combined with
efforts and there could be the possibilities of profits/loss.
Al Quran, Surah Al
Baqarah 2: 275
“Allah has permitted trade and has forbidden interest”
During the time of Prophet (PBUH)
riba was charged in several ways. Two main kinds of Riba at that time are:
- Riba Al – Nasiah
- Riba Al – Fadl
Riba Al – Nasiah : Literally
means delay or deferment. Technically it refers to an excess amount claimed
over and above the principal amount should the borrower feel to repay the
principal on the due date. It is defined as the excess resulting from
predetermined interest which the lender receives over & above the principal
amount it has lent out. This is considered the primary form of Riba. Al Quran
has expressly prohibited this kind of Riba. Also known Riba Al Quran / Al – Jahilliyyah.
Riba Al – Fadl : this type of
Riba has been established from Sunnah, for this reason it is also called Riba
Al – Hadith. Riba Al – Fadl actually means the excess compensation which is
taken in exchange for specific homogeneous commodities and encountered in their
hand to hand purchase and sale. The Messenger of Allah (PBUH) said: Gold for
Gold, Silver for Silver, Wheat for wheat, Barley for Barley, Dates for Dates,
Salt for Salt, Like for Like equal weights from Hand to Hand. When parties
exchange of similar value and one party pays an excessive compensation to the
other party, this is considered as Riba. The above mentioned hadith
specifically talks about six commodities which Muslim jurists refer to as
Ribawi commodities:
- Gold
- Silver
- Wheat
- Barley
- Dates
- Salt
Gharar : Lexical meaning to deceive, cheat, delute, lure, entice
& overal uncertainity. Gharar is whose consequences are hidden. According to Al-Qarafi, the definition of
gharar is "that which has a pleasant appearance and a hated essence".
Sale of probable items whose existence and characteristics are not certain, due
to the risky nature that it make it similar to gambling. The main reason for
prohibition of gharar is the existence of vagueness in right and liabilities
that can be exploited to deceive people that they are getting a better deal,
which in reality is not the case. Ambiguity in contract may arise when it
pillars and conditions are not clearly defined. Gharar also arise when certain
product is sold without label.
All businesses involves some
level of risk, therefore unlike riba, gharar is a relative concept when it
comes to uncertainty, risk and hazard - with a certain level of uncertainty
being tolerated. However, when it comes to deceit or fraud, gharar is an
absolute concept
AL – Quran, Surah an-Nisa
(4:29)
"...squander not your property amongst yourself unjustly (batil)
except it be a trade among you by mutual consent..."
HOW DOES GHARAR OCCUR:
When the subject matter itself unknown unless:
- The buyer has the option to choose the subject matter
- The parties to the transaction select the subject matter by mutual consent
- The subject matter is one of many things of the same kinds and value
When the specification are unknown:
- The goods are described in an ambiguous way
- The goods are simply pointed out
- An option to choose the goods is provided
- The goods are specified by taking a sample
Some example of gharar are:
- Sale of unborn camel’s baby still in the mother’s womb
- Sale of flowers before they appear on the plant
- Sale of milk in the lactose glands
- Sale of fish caught in one throw of a net
Maysir: Literally
means “a way of easily obtaining something without any effort”. Maysir applies
to all activities in which a person wins or loses mere chance. It includes all
kinds of gambling. In gambling the winner and the loser win or lose by mere
chance. The winner does not lawfully earn what he has won and the loser loses
his money without a fair compensation. Gambling allows the winner to consumes
other property unlawfully and unjust because in gambling there is no exchange
of counter values between parties.
Al – Quran, Surah Al – Maidah (5:90):
“O
you who have believed, indeed, intoxicants, gambling, (sacrificing on) stone
alters (to other than Allah) and divining arrows are but defilement from the
work of Satan, so avoid it that you may be successful”.
Al – Quran, Surah Al – Baqarah
(2:219):
“They ask you about wine and gambling. Say, “In them is great sin and
(yet, some) benefit for people. But their sin is greater than their benefit”.
And they ask what they should spend. Say, “The excess (beyond needs)”. Thus
Allah makes clear to you the verses (of revelation) that you might give thought”.
Consequences of maysir:
- Gives rise to hostility and hatred
- Enmity between the winner and the losers
Some example of maysir are:
- Betting on horsesrasing (betting on the outcomes of animal races)
- Soccer matches
- Lotteries
- Cassino type games
Prohibites Sales (Haram Goods): If Muslim sells Haram goods/services, he is not only
being inconsistent in his behavior, but also mocking the law of Allah and
having the inability to differentiate between right or wrong. Trading goods
which are normally used to commit or encourage sins is Haram. Example of such goods including swine, intoxicants,
generally prohibited foods, as well as idols, crosses, statues and the like (Al
– Qadrawi, 1997).
The Prophet (PBUH) once said:
“Surely, Allah and His Messenger have prohibited the sale of wine, the
flesh of dead animals, swine and Idols”.
There are seven prohibited industries
in Islamic Finance investment:
- Conventional financial services that features the transactions based on interest, speculation, and/or gambling: such as conventional banks, investment companies, insurance companies are considered non compliant.
- Certain food and beverage industry sectors: such as companies which core businesses involve alcohol, pork products, other meats that not slaughtered according to sharia law arent considered sharia compliant
- The tobacco industry and activity related to illegal drugs: most sharia scholar agree that the use of tobacco and investing in tobacco indutry are prohibited.
- Gambling: Islamic fund can not invest in casinos, online lotteries, lotto draws and betting transactions.
- The productions of weapons of mass destruction (WMDs)
- Certain sectors of the entertainment industry: sharia prohibitions apply to adult entertainment product, such as: magazines, videos, audio recording, websites and all methods of distributing pornography. Also including erotic arts and certain types of non islamic music and cinema.
- Cloning: Islamic scholars must continually make decisions about the compliance status of new technologies and industries.
Read more:
INCEIF Essay by Syed Ahmad Hashmi, Bilal Aziz, Ahmad Farhan & Asyraf Azhar (2014), Prohibited Elements in Islamic Commercial Law
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