How is the financial market in Islam different from standard Western lending? How does Shariah instruct Muslims to enter into contracts? How can a Muslim achieve the greatest financial success? Perhaps the questions that arise in the field of Islamic finance are endless.
This is a very popular but extremely complicated subject which every Muslim, not just an entrepreneur or the head of a large company, should understand. Why? Because each of us in the course of our lives necessarily enters into a contract of sale and purchase, and constantly uses paper money or bank cards.
First of all, we need to figure out why we should know the elementary rules of trade. There are several reasons for this, Ansar Hazrat Valiulla, Director of the Russian Centre of Islamic Economics and Finance of the Russian Islamic Institute, is convinced.
1.To achieve human happiness in both worlds.
In many ayats of the Noble Quran, the Almighty talks about the rules of trade, how to deal with people, what rules to follow when buying or selling.
‘Woe to those who give less, those who take full measure when they buy from people, but give less when they measure or weigh for buyers. Do they not think that they will be resurrected for a tremendous Day?!’ (Al-Mutaffifin, 1-6 ayats)
It is narrated: ‘Once when the Messenger was walking around the market he saw foodstuffs piled up in a heap. When he put his hand into the heap, his hand got wet. He said: ‘Oh, seller, what is this?’ The seller of the goods answered: ‘Messenger of Allah, this is the rain that has wet my goods’. In reply, the Messenger said the following: ‘Couldn’t you have turned this soggy side upside down so that people (buyers) could see it?’ And added: ‘Whoever deceives us is not of us!’ (Muslim)
2.For care and preservation of rights.
3.Not to encroach on someone’s else property.
Each of us will be held accountable for the deeds we have done, as well as for what we have done to others.
4.To maintain proper and benevolent relationships between people.
A person during transactions should be wary of lies and ambiguity of contracts – something Islam has forbidden.
For instance, righteous Caliph Umar drove away those traders who were not aware of the mu’amalat principles. Therefore, before doing something, one should study the fundamentals of the mu’amalat and know what is permissible and what is strictly forbidden.
In what case would the resulting earnings be a good thing?
‘First of all, one should be wary of the forbidden. A good income is to ensure that no vice is added to the cause. Secondly, a person should always bring the matter to an end and do it in the best possible manner’, Ansar Hazrat Valiulla notices.
In order to run your business successfully and permissibly, you need to understand the basic prohibitions in Islamic finance.
1.Riba – usury.
It is forbidden both to take and give it.
‘O believers! Fear Allah, and give up outstanding interest if you are ‘true’ believers. If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal – neither inflicting nor suffering harm’ (Al-Baqarah, 278-279 ayats)
2.Gharar – uncertainty, jahiliyyah – ignorance.
This is about doubt, hesitation, and unawareness of what and when will happen.
There are significant uncertainties that lead to disagreement and make a contract wrong, forbidden to a Muslim. For instance, rent for an unknown term, uncertain existence of goods, uncertainty of time and place, etc.
‘If we speak about minor uncertainties, we need to realize that they are present in almost all contracts and usually do not lead to disagreement. For example, selling a house without inspecting its foundations, renting a house for a month when the number of days in the month differs, etc.’, Ansar Hazrat explained.
There is also a medium uncertainty. For instance, selling something that may be hidden in the ground or something that may only become known after it is broken up; renting a fruit tree; uncertainty in remuneration in a contract promising reward.
3.Kymar – gambling.
That is, any game of property in which the winner takes everything from the loser. At the heart of kymar is a relationship of risk, competition or rivalry between participants.
‘They ask you ‘O Prophet’ about intoxicants and gambling. Say, ‘There is great evil in both, as well as some benefit for people – but the evil outweighs the benefit.’ (Al-Baqarah, 219 ayat)
4.Ihtikar – monopolization.
Ma’mar ibn Abu Ma’mar, a man from Banu ‘Adi ibn Ka’b’, tells: ‘The Messenger of Allah (peace and blessings of Allah be upon him) said, ‘Only a sinner buys and withholds [goods needed by people]’ (Muslim).
5.Gabn – overpricing and najash – marking up the price.
It is forbidden to unjustifiably mark up the price of a product, especially for essential goods. This amounts to cheating and misleading the customer.
6.Israf – wasteful usage of resources.
This is exceeding the measure and using the property improperly.
‘O children of Adam! Dress properly whenever you are at worship. Eat and drink, but do not waste! Surely He does not like the wasteful.’ (Al-A’raf, 31 ayat)
7.Rishwa – bribe.
This is property (money, goods, valuables, real estate, service) that is given as a bribe, mitigation, inducement to one’s side with a selfish motive: to assert untruth, to prevent the truth, etc.
As far as the forms of trade relations in Islam are concerned, there are several, each with its own features and rules:
Trade (murabahah; sarf – currency exchange);
Tenancy contracts (ijarah – leasing);
Partnership (mudarabah, musharakah);
Project financing contracts (salam, istisna);
Agency contracts (waqala);
Risk mitigation instruments;
Zakyat;
Waqh.
‘When we speak about trade relations, about making money, it is also important to know the reasons that lead to increased prosperity. Among them are: additional types of worship, maintaining kinship relations, dua, sadaqa, early rise in the morning, istigfar’, Ansar Hazrat Valiulla concluded.
‘The best almsgiving is the one, after (giving) which (the owner) has wealth left. The higher hand (giving) is better than the lower hand (taking) and start spending with those whom you (are obliged) to support’ (al-Bukhari).
Ilmira Gafiyatullina
Photo: Creative Commons