Islam frees its followers to engage in any business and financial transaction. It’s because financial transaction is very crucial to our life. Nowadays we do at least one financial transaction per day. Not to mention the long term transaction that we have to commit for a long time.
However, as a Muslim we have the Qur’an and the Sunnah as our main resources and guideline. Therefore we have to make sure that everything we done shouldn’t be across with what stated in both the Qur’an and the Sunnah. And that’s including the business and financial transaction we are engaged with.
Those rules and guideline made to keep the objective of Shari’ah. While the objective of Shari’ah made to keep the public interest. Muslim have to follow all the rules in order to keep the life be in harmony, and to get the blessing from Allah. Because after all, Allah’s blessing is the most important thing that all Muslim want.
There are three main elements that have to be avoided by all Muslim in any financial transaction they made. They are Riba, Gharar, and Maisir. Sadly these three elements are still practiced in most modern conventional transaction. In fact some Muslim still enjoy engaging with them for certain reason. Some of them don’t understand that what they’re doing is wrong. For example, they heard about Riba, but they don’t get the concept of Riba or why is it prohibited. But some people, they know that they are doing the wrong thing, but simply ignore and make excuses just because they can’t let it go.
The following pages are the elaboration of the prohibited elements. It includes the definition, the source of the prohibition, and some other related explanation. It is hoped that by reading this, people can get more knowledge about what they are engaged with. And furthermore start to become aware and avoiding the elements.
The Main Prohibited Elements
1. The element of Riba
1. Definition of Riba
According to Sheikh Shady Alsuleiman, Riba means usury or interest. In Arabic, the word Riba (الرب) means increase, whether in good or bad thing. While in Shari’ah terminology (Islamic law), Riba can be defined as: - An increase of one of two items in transaction, or
- An increase in a return of a debt
Riba is considered as one of the seven major sins (Al-Saba al-Mubiqat) which are: believing in gods other than Allah; magic; murder; riba/usury; unlawfully taking orphans’ money; fleeing from the battlefield; and accusing chaste, pious women.
2. Prohibition of Riba in the Qur’an and the Sunnah
There are numbers of verse in the Qur’an that consist the prohibition of Riba. They came in text revealed on stages. Below are those verses in the order of their revelation, as cited by Muhammad Ayub: • Surah al-Rum, verse 39
“That which you give as Riba to increase the people’s wealth increases not with God; but what which you give in charity, seeking the goodwill of God, multiples manifold.” (30: 39)
• Surah al-Nisa’, verse 161
“And for their taking Riba although it was forbidden for them, and their wrongful appropriation of other people’s property. We have prepared for those among them who reject faith a grievous punishment.” (4: 16)
• Surah Al-e-Imran, verse 130
O believers, take not doubled and redoubled Riba, and fear Allah so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey Allah and the Prophet so that you may get mercy.” (3: 130)
• Surah al-Baqarah, verse 275-281
- “Those who take Riba shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: ‘Trade is just like interest’ while God has permitted trade and forbidden interest. Hence those who have received the admonition from their Lord and desist, may keep their previous gains, their case being entrusted to God; but those who revert, shall be...
JUSTICE THROUGH SHARIAH COMPLIANT COMMERCIAL TRANSACTION
November 10, 2013
JUSTICE THROUGH SHARIAH COMPLIANT COMMERCIAL TRANSACTION
Method and Application
One of the underlying characteristic of Islamic Financial System is it is that keeping view of certain social objective for the whole benefits of entire society. To achieve the said objective, is it crucial for the structure of each transaction to generate benefits to all parties involved in the transaction.
Commercial transaction, in law is the core of legal rulings governing business deal1. The most common types of commercial transaction involving such specialised area of the law and legal instruments e.g. sales of goods, transfer of fund, trust contract as well as loan and financing arrangement.
In view of the nature of transaction, the essential part is to ensure the justice and fairness treatment to all parties involved in the commercial dealing. In shariah commercial transaction, one of the key elements is the justice and transparency must prevail in all circumstances (Hassan, 2008).
The objective of...
...If there is Shariah Non-Compliance in the entity, who is responsible to that activity?
Conventional auditing procedures do not account for the speciﬁc Shariahcompliance risk to which all Islamic ﬁnancial institutions are exposed. The role of a Shariah auditor is different to that of a conventional auditor because its remit is derived from the basic values of Islamic society. The most important point to be noted is that a Shariah audit is separate from the ﬁnancial and operational auditing processes undertaken by Islamic ﬁnancial Institutions. Deloitte explains in its Islamic Accounting Guidelines that: “Standards for Islamic ﬁnancial institutions have to be developed because in some cases Islamic ﬁnancial institutions encounter problems because the existing standards were developed based on conventional institutions, product structures or practices, and may be perceived to be insuﬃcient. The Islamic finance industry is in improvement whereby there is enhance in practice, improve risk management and also increase in number of investor.
A proper standard framework for ShariahCompliance Audit is essential to ensure the harmonization of Shariah practice in Islamic Financial Institutions. The development of Shariah audit programme is also important as to ensure the procedures of each product in Islamic...
Q1. State three most important aspects of law as related to business. Give your rationale as to why those are the most important.
Ans. Business and law are interlinked to a large extent. It would not be possible to do business without law. There are some important aspects of law as related to business are given below.
Every organization needs a porichiti and it is known by a name which represent any business. Every organization has a name and it shows a distinction than other organization firstly. Structure is very important for any organization because it represents strength of any organization.
Different types of organization are available in the market and which type of organization it will be it depends on the owner of the company. It may be sole proprietorship or partnership or corporation. It depends on investment and liabilities also.
Business license is a important in case of businesses. Every organization needs a business license when they started and government will provide only.
Contract is a legally enforceable agreement between two or more persons to do, or to refrain from doing, a particular thing in exchange for something of value. It can be written, using formal or informal terms, or entirely verbal.
Without agreements with customers or clients no business could exist. Most major...
...Concept of Shariah governance
The definition of “shariah governance system” is referred to the processes and structures composed by the stakeholders in the Islamic Financial Standard Board in order to ensure that shariah rules and principles are compiled within the industry. Islamic Financial Standard Board began their operations on March 2003. They are considered to be an international standard setting organization for the purpose of promoting and enhancing the stability of the Islamic financial services industry through issuance of worldwide and practical standards and principles that would guide the banking, insurance sectors as well as capital markets on their operations. Thus, IFSB-10 has defined shariah governance systems as ““A set of institutional and organisational arrangements through which IFIs ensure that there is an effective independent oversight of Shariahcompliance over the issuance of relevant Shariah pronouncements, dissemination of information and an internal Shariahcompliance review” ref. Thus, the main objectives for shariah governance framework and the reason for its existence is to ensure that all the activities, transactions and operation done by Islamic financial institutions are in compliance with the shariah rules and principles. In addition, it is to provide a...
...Introduction to risk management
islamic financial institutions
waad from the Shariah perspective
Table of Contents
The definition of waad 3
Pillars of waad 4
Term, conditions and prohibitions of waad 5
The difference between waad and aqad 5
Scholars opinions 6
Applications and issues of waad in modern Islamic financial transactions and its importance 10
Effects of waad from Islamic financial institutions perspective 11
Humans sometimes obligate themselves with voluntary matters, which requires them to meet these obligations in the future, because the practical life of individuals and groups require them to, and because the individual is a member of the society, he must extend links between him and the community, some of which social and economic links. Contracts are divers images, known and common among members of the community, comes from it obligations to be fulfilled.
One of the faces of civil and rural socity, meeting the obligations of its members various promises and covenants, in old times, one would promise his brother what would be beneeficial for both parties. And the promise is achieving benevolence to a man by another. Promise is like a project to fix the society and the individual, there is no doubt that fulfilling and accomplishing it, has a great impact on social relations,...
...SHARIAH COMPLIANT INVESTMENTS IN INDIA - SCOPE AND POTENTIAL
Islamic finance is one of the more interesting side stories in the current financial world and has rose to prominence lately. Egypt was the first country to experiment with this form of practice. Over the years, Islamic finance has grown tremendously all around the world with established agencies like Standard & Poor’s (S&P), Dow Jones, FTSE and others developing their ownShariah compliant stock indices. There is a huge amount of untapped investment potential in India as we are the second most populous Muslim nation in the world after Indonesia. A lot of potential investors are staying away from the stock market as they feel the companies that are listed on the Stock exchanges are not Shariah compliant. This article looks at the tremendous potential that can be harnessed through the Indian stock market if the Shariah compliant investment opportunities can be brought to the notice of the huge Muslim population who are staying away due to their religious beliefs.
The Indian Stock Market has been experiencing a steady rise, at times meteorically, and has moved from the magical 5000 mark in Oct 1999 to the latest 15000 mark in July 2007. Several people who had not been initiated into investing in options other than the traditional fixed deposits & government bonds till 2000...
...MAQASID AL SHARIAH
(Goals, purposes and objectives of the shariah)
Maqasid Al Shariah is branch of Usul Fiqh made systematic by Imam Syathibi as what Imam Syafi’ did to Jurisprudent. Syathibi was born as Abu Ishak Ibrahim bin Musa bin Muhammad Allakhami al-Gharmathi in Granada in 730H and died 790H or 1388. He lives during the reign of Bani Ahmar descendant of Sa’ad bin Ubadah a companion of the Prophet. He was one of the great scholars of Mazhab Maliki.
Why Allah revealed the Shariah?
Scholar like Ibn Tarmiyya (661-728AH, 1263-1328 AD) said that Allah revealed the Shariah in order to achieve justice. Other scholars thought the Shariah is meant to achieve happiness. Al-Ghazali (450-505 AH / 1058-1111 AD) said the Shariah is for the achievement and realization of benefits for man on earth.
If we look closely at the Shariah, the three objectives above we will find that they actually complement each other; happiness for mankind cannot be achieved without the existence of justice, and justice is an essential benefit and interest of people on earth.
Therefore the Shariah was revealed for one universal purpose that is to realize man’s best interest on earth.
Human by nature wants to be happy and to live as good life as possible, but this is not possible unless people cooperate with one another, and cooperation is...
* Takaful originates from the Arabic word kafalah, which means guaranteeing each other. Takaful system is based on the concept of social solidarity, cooperation and mutual indemnification of losses of members. In addition, the Takaful system is perceived as cooperative or mutual insurance, where members contribute a certain sum of money to a common pool. The Takaful system is based on the principles of mutual co-operation and responsibility between participants in a group. It is defined as an Islamic insurance concept which is grounded in Islamic muamalat (Islamic banking), observing the rules and regulations of Islamic law.
* There are two criteria which the Takaful consumers’ depend on to gain the confidence on the product. First, the operations of the business must fully comply with Shariah principles and second, the consequential wealth and financial progress of the takaful operators need to be disclosed. Information on Shariahcompliance is very important in influencing the buying decisions amongst Muslims, increasing their understanding of their religion, improving transparency for enhancing governance, and protecting the Islamic identity of takaful operators. Furthermore, Shariahcompliance can be used as a weapon by takaful operators to expand their market base and compete against their counterparts.