THE CONCEPT OF INVESTMENT, PROFIT AND INTEREST

THE CONCEPT OF INVESTMENT, PROFIT AND INTEREST

 

 

All thanks and praises are due to Allah. We start by seeking protection and guidance of Allah against Shaytan. All Thanks and Praises are for Allah, May His blessings be upon Mohammad IbnAbduLlah (SWA) his household, companions and all true Muslims. In Shaa Allah we will address part of the topic tonight and complete it next week same time.

In Shaa Allah, we will concentrate on how to identify riba, halal shares etc rather than the punishment.

In Shaa Allah, brothers are encourage to ask many questions for better understanding of the topic. There are many business, transactions and dealings which are forbidden in Islam, however, many Muslims indulge in such businesses ignorantly. Ignorance is not an excuse as long as you intentionally neglected a responsibility (that is seeking knowledge of your business). We have to know that working to keep ourselves and our family is a worship (we get rewards) and so should be regulated by the Quran and Hadith.

                                      

To start off!

*1*

*Riba*is an additional value or price without anything in return.

 

The word ribs is originated from basic understanding *increase or growth* (ISLAMQA. INFO 11/01/2017).

*2*

Ribs was a common practice of the Arabs prior to Islam.There is a consensus among the scholars that riba is forbidden, however they differ in the detail understanding .E.g "the concept of payment by *instalment*"  majority of the scholars believe it's permissible such as *sheikh Bin Baz*(May Allah have mercy on him) and the minority believe it's forbidden such as *Sheikh Albany*(May Allah have mercy on him).

Surah Al-Baqara, Verse 278:

يَاأَيُّهَاالَّذِينَآمَنُوااتَّقُوااللَّهَوَذَرُوامَابَقِيَمِنَالرِّبَاإِنكُنتُممُّؤْمِنِينَ

 

O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers.

Surah Al-Baqara, Verse 279:

فَإِنلَّمْتَفْعَلُوافَأْذَنُوابِحَرْبٍمِّنَاللَّهِوَرَسُولِهِوَإِنتُبْتُمْفَلَكُمْرُءُوسُأَمْوَالِكُمْلَاتَظْلِمُونَوَلَاتُظْلَمُونَ

 

But if you do (it) not, then be apprised of war from Allah and His Apostle; and if you repent, then you shall have your capital; neither shall you make (the debtor) suffer loss, nor shall you be made to suffer loss.

 

*Types of Riba*

Generally there are two types of riba *Riba al-Nasiah and riba al-Fadl*

 

A. Riba al-Nasiah :this is where the growth or the increment in price is as a result of postponement in payment. It is observe on 3 scenarios :

1.Things sold on postponed payment, e.gHamdu sold a book to Munash on deferred payment and the agreed date is due but Munash couldn't make payment upon that Hamdu extended the date by increasing the price.

In this case the increment was not agreed at the unset of the transaction.

2. Because Munash is to make payment later,  the original price has been increased by Hamdu at the point of initiating the contract.

In this case the increment was agreed by both at the unset.

3.This is the combination of case 1 and case 2.

At the beginning of contract Hamdu increase the price because of deferred payment and when the time matured for Munash to make payment she couldn't and then Hamdu extended the date again by increasing the price again.

In this case the initial increment was agreed by both but the second was not. All these three cases are forbidden (is riba) (Knowislamicbanking. Com 12/01/2017)

 

B. Riba al-Fadl is where there is increment at one part when two things of the same kind are exchange.

e.g To exchange 5kg of wheat to 7kg of a different wheat, may be because it not of the same quality as the former. The Messenger of Allah (SWA) mention only *6*items under this type of riba:

1. Gold to gold

2. Silver to silver

3. Date to date

4.  Salt to salt

5. Wheat to wheat

6. Barley to barley

 

However, the above mapping are only permissible if they are of the quantity (2bows of date to 2bows of date) and should be hand in hand.

*But to barter items of different kind (gold to silver) to the agreement of both parties are permissible and is not riba even if one party seems to present more in quantity compared to the other. The big question is that should we limit riba al-Fadl to only the 6 items mention by Allah's messenger SWA?

*4

Majority of the scholars including the four Imams, has base on the six item and derived some basic principle and reasons which are very important :

Principle 1

This Hadith indicate that any things (wheat to wheat, rice to rice etc) that are sold by *weighing or measuring the volume* cannot be bartered except with its *equivalent*(10kg of rice to 10kg of rice).

This first principle, help us answer (In Shaa Allah) the question of exchanging exchanging *mobile phone to mobile phone*where may be one party will add money, this is permissible because phone is not part of the six items and it not exchange by weighing or measuring the volume.

Allah knows best.

Principle 2

The Hadith again indicate that anything of the same kind(gold to gold, Ghana Cedi to Ghana cedi, dollar to dollar etc) that is generally use as means of exchange cannot be bartered except in it equivalent (Gh50 note to Gh50 coins😊)

* Moreover between different items or currencies are allowed to exchange to the understanding of the two parties and should be hand in hand. (Bukharee book 34 Hadith number 124) e.g

Exchanging gold to silver, dollar to Gh cedi, Gh cedi to CFA etc)

One important clue in identifying riba in most of the business system is that *Given money and taking money without any commodity or material being involve*

Allah knows best.

*5*

*Shares and partnership*

Generally shares could be permissible or forbidden depending on the activities and the policies of the company. On this base it can be broadly divided into three :

1.Shares that activities are forbidden in Islam. E. g riba base company, alcohol production company etc. This type is forbidden.

2.Shares that mixed forbidden and permissible work. Thus  a company that partially involve in Haram stuff. Its forbidden to invest or buy shares in such organization.

 

Some type of partnership in Islam*

1. *Mudaarabah*(Profit sharing) is a type of shares where there is agreement between the capital provider (or the bank) and the expertise (or an intrepreneur) into a business venture and the profit or loss is shared to them both.

*Conditions for validity of Mudaarabah*

A. In case there is loss, the capital provider loses his capital and the expertise loses his provision of labor

B.  The ratio of profit to the capital provider and the management expertise should be agreed in advance.

C. It is the responsibilities of the capital provider to provide the investable  assert (such as cars, land, furnitures, building, equipment etc)

D. All the assert are originally belong to the capital provider. Is only the profit realized at the end of the business that is shared according  to the ratio.

E. The business can be terminated at any time by either of them except stated otherwise in advance.

2. *Mushaaraka*(partnership)

Is a type of shares where by there is an agreement between two or more parties (some times bank in partnership with it clients) contributing equal or varying amount to mobilize the capital to establish a business or project whereas profit or loss are shared according to the ratio contributed.

*Conditions for validity of mushaaraka*

A. Capital or shares cannot be agreed on dept. B. The share owners can agree in advance to maintain the ratio of the capital contributed or a share owner to agree to sell his share.

Etc

3. *Muraabaha*(cost add to financing)  Is a system whereby a person (the client) inform the bank(or an individual) to purchase his wanted or needed item(goods or equipment etc) and then sell the items to him (the client).In this case, the bank buys the goods and claim clear and full ownership of the goods before the bank then sell the goods to the client on instalment basis.

*Conditions for validity of Muraabaha*

A. All the Islamic principle regarding installment must be fulfill.

Etc

And others, which time will not permits us to mention all.

In Shaa Allah to climax the discussion with the last topic for the day.

*Ihtikaar (Monopoly)* is a market system in which there are many buyers but only one seller. (wordWeb English dictionary)

 

Monopoly in Islamic perspective is to maintain the opportunity to gather or collect and control of goods by increasing the price.

(Islameconomy. blogspot. 17/7/2017)

 

Monopoly is forbidden in Islam because it leads to injustice and difficulties on the buyers and the people as a whole. (Muslim, Ahmed and al-Bayhaqi)

سُبْحَانَرَبِّكَرَبِّالْعِزَّةِعَمَّايَصِفُونَ

Glory be to your Lord, the Lord of Honor, above what they describe.

وَسَلَامٌعَلَىالْمُرْسَلِينَ

And peace be on the apostles.

وَالْحَمْدُلِلَّهِرَبِّالْعَالَمِينَ

And all praise is due to Allah, the Lord of the worlds.

It is compulsory upon every Muslim not to approach anything (Trading, commerce, transaction, salat, Hajj, fasting etc.) except he or she knows the Islamic rulings about it. This is because without having Islamic knowledge about your business you may use your own desire or follow what people do which may contradict with the Laws of Allah, in this case all the outcome of the business is haram (forbidden and illegal) and will be deprived of the blessings of Allah. *2*

HARAM(FORBIDDEN) AND HALAL BUSINESS, COMMERCE AND TRANSACTIONS

HARAM:

1.

A transaction or business that preoccupy one form worshiping Allah is forbidden. Any transaction or business that totally or partially prevent one from fulfilling his duties to Allah and any outcome of such business is illegal. For example, if the second call for pray on the day of Friday is made any transaction after it is strictly forbidden.

 

However when a call of prayer is made for any salat other than Friday salat then the transaction is permissible as long as the person will not miss salat in congregation but not encourage.

 

But if the salat in congregation is started then the transaction is forbidden.

Allah knows best. Surah Al-Jumua, Verse 9:

يَاأَيُّهَاالَّذِينَآمَنُواإِذَانُودِيَلِلصَّلَاةِمِنيَوْمِالْجُمُعَةِفَاسْعَوْاإِلَىٰذِكْرِاللَّهِوَذَرُواالْبَيْعَذَٰلِكُمْخَيْرٌلَّكُمْإِنكُنتُمْتَعْلَمُونَ

 

O you who believe! when the call is made for prayer on Friday, then hasten to the remembrance of Allah and leave off trading; that is better for you, if you know.

Allah deserves all right to be worshipped as He describe for Himself. The meaning of the one who neglect his duties to Allah at the expense of money (business) indicate that he gives precedence and value to money over Allah.

SubhaanaLlah😳

 

May Allah forgive our parents and have mercy upon them* Aameen

“By men who neither traffic n or merchandise can divert from the Remembrance of Allah nor from the practice of regular charity…” (24:37)

 

“The evil one has got better of them: So he has made them lower the remembrance of Allah. They are the party of the Evil One. Truly it is the party of the Evil One that will perish!” (Q 58:19)

2

Selling and buying things which are Haram (alcohol, pork, a dead animal or blood poured forth) in Islam. *The general principle is that anything Allah forbids; He forbids its price*. This includes cigarettes. “Say, ‘I find not in that which has been revealed to me anything forbidden to be eaten by one who wishes to eat it, unless it be Maitah (a dead animal) or blood poured forth (by slaughtering or the like) or the flesh of swine(pork), for that surely is impure or impious(unlawful) meat (of an try ) which is slaughtered as a sacrifice for others than Allah…” (Q 6:145).

Narrated by Jabir ibn Abdullah: “Allah and His Messenger SAW have forbidden the sale of alcohol, dead meat, pork, and idols.” It was said: “O Messenger of Allah, what do you think of the fat of dead animals, for ships are caulked with it and people use it to light their lamps?” He said, “No, it is haram.” Then the Messenger of Allah SAW said: “May Allah curse the Jews, for when Allah forbade them animal fat, they melted it down and sold it and consumed its price.” (Al-Bukhari)

 

“When Allah forbids a thing, He (also) forbids its price.” (Abu Dagwood 3488)

3

Again, a harvest or animals which zakat(charity) has not been settled is haram to sell or buy (if you know).

Also is haram for a barber to help someone attain any forbidden hair cut such as “qaza” that is trimming off a part of the hair and leaving part.

Narrated by Ibn Umar, Allah’s Messenger “Forbade qaza.”

DEALING IN THINGS WHICH ARE MAINLY USED TO PERPETRATE EVIL

An example is selling clothes which are worn by women  to expose their nakedness outside.

This is becomes true when the seller is aware that such materials are mainly used in the wrong direction. These forbidden clothing promote mischief and evil in the land such as zina(fornication). Again, selling cigarettes and qaat. Cigarettes are very dangerous and instigate numerous diseases and for this reason it is forbidden to deal in cigarette business. The seller is selling something which is used to cause evil against oneself. In this case the seller is helping the smoker to sin. “Help ye one another in righteousness and piety but help ye not one another in sin and rancor: Fear Allah: For Allah is strict in punishment.” (Q 5:2)

5

AYN TRANSACTION: This is where the price to be paid for an item is deferred but when the price is paid immediately the price is lowered. this type of transaction is very common and many see it not to be riba(Interest) but it is.

 

 

It runs on the same basis as going for loan and paying it later with interest on it. In this case the loan plus the interest (the addition) is paid at the end of the specified period. Narrated by Yahya, “I sold drapery to the people of Dar Nakhla on credit. Then I wanted to go to Kufa, so they proposed that I reduce the price for them and they would pay me immediately. I asked ZaydibnThabit about that and he said, ‘I order you not to accept increase or to give to anybody.”(Muwatta chapter 31 Number 82). In Shaa Allah we end our discussion here by reminding my honoured brothers that network business such is *Forever living,Teinchi,global alliance, helpGhanaetc*

 

And I  plead on my brethren to read or ask scholars about the Islamic conditions governing *Instalment*

 

May Allah forgive us,bless us and guide us all.