What financial transactions are not permissible

What financial transactions are not permissible

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What financial transactions are not permissible

 

O Muslim investor, keep to permissible transactions so that you will win in this world and the next

No matter how glamorous and tempting prohibited wealth may seem to you, do not, again do not, get even close to it, as if you do you will lose this life and the next. Permissible wealth is a pure, blessed substitute for prohibited wealth, and whoever leaves something for Allah, Allah will give him better than it instead. You should, first and foremost, work to gain Allah’s Pleasure, and the stores of the heavens and earth are in the Hands of Allah. Allah says, “And whosoever fears Allah, He will make a way for him to get out (of difficulties).  And He will provide him from where he never could imagine. And whosoever puts his trust in Allah, He will suffice him. Verily, Allah will accomplish his purpose. Indeed Allah has set a measure for all things” (Surah Al-Taliq: 2-3). The Messenger of Allah (peace be upon him) says, “O people, fear Allah and work hard to achieve your needs. As no one dies until all his provisions reach him, even if it comes to you one at a time. So fear Allah and work hard to achieve your needs, and take what is permitted for you and leave what is prohibited” (related by Ibn Magah).

F:\Articles-En\What financial transactions are not permissible\mony-1.jpgSo the Muslim investor does not trade with things which are prohibited like wine, dead animals, swine meat, interest-based transactions, cigarettes, and all other prohibited matters.

A Muslim who fears Allah should not be careless concerning prohibited matters in any way at all, as if he does he deserves to be cursed and removed from Allah’s Mercy. Ibn Abbas reported that the Prophet (peace be upon him) said, “Allah cursed the Jews as Allah made certain fats prohibited for them, so they sold it and used the money gained from the sale. Truly, if Allah makes something prohibited for a particular people to eat, the money gained from selling it is also prohibited” (related by Abu Dawoud). 

There is no need to mention that the basic ruling for transactions is that they are permissible unless there is a proof that states a particular transaction is prohibited. This is because of Allah’s saying, ‘Allah has made trading permissible and made interest prohibited” (Surah Al-Baqarah: 279).

So the prohibition of interest is one of the basic rulings in Islamic legislation with regards to transactions, it is a basic religious ruling which every Muslim knows, and its prohibition is stated in the Quran, the Sunnah of the Prophet and the consensus of scholars

”O you who believe! Do not devour usury, doubling and multiplying (the return); but fear Allah that you may (really) prosper” (Surah Al-Imran: 130),

and the hadith related by Jabir who said, “The Messenger of Allah (peace be upon him) cursed the one who consumes interest and the one who pays it, the one who writes it down and the two who witness it” (related by Muslim).

With regards to consensus, all the scholars agreed that interest in any dealing whatsoever is prohibited. In fact, all the heavenly religions F:\Articles-En\What financial transactions are not permissible\images.jpgagree upon the prohibition of interest. With regards to its prohibition, it is enough that Allah is at war with one who deals in interest.

What are the different types of interest?

First: Interest of the time of ignorance (interest on loans).

This is the increase of the loan in return for giving it back after some period of time, regardless if one agreed on this condition after the time period finished or at the beginning of the time period.

It is clear interest which became wide-spread among the people during the time of ignorance, and the banks of our time have reintroduced it again, as every loan which brings a benefit for the lender is interest. It is the clearest and ugliest form of interest, and about it heavenly texts were revealed and there is a consensus of the scholars on its prohibition.

The ruling on interest does not change for different locations; it is prohibited above all the ground, below all the earth. Therefore it is not permissible for a Muslim to take or give interest to a non-Muslim, even if they are at war with the Muslims.

Second: Interest when Selling Goods.

This is interest when selling goods. The religious texts have stated six items with regards to interest from sales: gold, silver, wheat, dates, salt and barley. The Prophet (peace be upon him) said, “Gold (paid) for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt; the same type for the same type, and the transfer of the bought and sold goods has to be completed at the same time. If, for these six types, the goods sold are different from those that are bought, then you can complete the transaction as you like as long as the sold and bought goods are transferred at the same time” (related by Muslim).

There are two types of transactions involving Interest from selling goods:

First: Interest resulting from a surplus.

This is when one of the two goods which are transferred is more or better than the other. It only concerns the types which are the same.  Therefore selling gold for gold has to entail the two gold goods being exactly the same and both being transferred at exactly the same time; if one good is more than another, than this entails interest from selling. Consequently, it is not permissible to sell a gold or silver article for better gold or silver because of the workmanship involved in making it. The person should sell the gold or silver article he has for dirhams and then buy the other gold or silver article.

Second: Interest due to a credit.

This is when the seller takes more from the buyer in return for the buyer paying the money after some period of time. For example, the seller gives 1000 pounds for the buyer to return it as 1100 pounds after one year.

If the person buys one currency for another currency, it is like the case of buying gold for silver, which is permissible even if one of them is more than the other, but the transaction has to be completed at the same time, so the seller has to give one currency at the same time he takes the other. This is because the Prophet said, “If the transaction involves different types, of the six types (included in interest from selling goods), the sale is permissible as long as the transfer of goods happens at the same time” (related by Muslim).

So the rules that govern interest from selling goods are:

1)It is obligatory for the sold and bought goods to be the same amount and be transferred at the same time when they are the same type (of the six types that could involve interest from selling) and genus (either metals or foodstuff), like when selling gold for gold or silver for silver.

2)It is obligatory to transfer the sold and bought goods at the same time, but one of the two can be more or better than the other one if different types but the same genus (metal or foodstuffs) are involved, like when selling gold for silver, or selling wheat for dates etc.

3)It is not obligatory to transfer the goods at the same time and one of the goods can be more or better than the other when different types and different genus are involved, like when selling gold for wheat, or silver for dates etc. In such a case it is permissible for one good to be more or better than the other and the transfer of the goods does not have to occur at the same time.

 

Do not sell something which is ambiguous!

F:\Articles-En\What financial transactions are not permissible\What financial transactions are not permissible.pngThe prohibition of selling goods whose details are not clear is an important basic rule in Islamic legislation due to the following hadith: The Prophet prohibited a transaction determined by throwing stones and transactions that are ambiguous (related by Muslim). This is because it leads to taking people’s money without right, conflicts between people, and the inability of giving the buyer the goods, all of which results in distancing, cheating and hostility between people.

The Prophet (peace be upon him) warned us about this when he referred to the sale of fruit before it was ripe or even present, saying, “What do you think if Allah denies anyone his brother’s money?’ (agreed upon).

This is because no one is sure that the fruit will not suffer any blight etc. so will become ruined, and this would lead to unnecessary ambiguity. If this happens, the buyer’s money will have been taken although he does not receive the goods, and the seller would have taken the money without any right. This causes enmity and hatred.

Ambiguity in sales concerns goods whose states are unknown; the goods could be either corrupt or sound. Ambiguity in sales is prohibited, whether there is ambiguity in the contract, the price or the time the goods or money will be transferred.

What are the types of ambiguity?

There are three types:

1-When there is a lot of ambiguity; there is a consensus among the scholars on its prohibition. Examples of this type are selling fish in the river or birds in the sky.

2-When the ambiguity is little; scholars agree on the permissibility of such sales. Examples of this type concern the foundations of a house or the lining of clothes.

1)3- When the ambiguity is medium, neither a lot or a little; scholars have differed on the permissibility of such sales. The permissibility depends on the amount of ambiguity involved, if it is large or not; the classification of large or not being based on what is usually accepted as such by the general population in the society.

Does any ambiguity ruin a financial transaction?

Prohibition of ambiguity in transactions cannot be taken as an absolute rule. The aim of the Islamic ruling has to be considered; this is because virtually all transactions have some degree of ambiguity in them. For this reason, the scholars outlined a list of characteristics that make an ambiguity affect the transaction, and these have to be present for the transaction to be considered one which is ambiguous. They are the following:

First: the ambiguity has to be much

and clear.

The scholars agree that a small amount of ambiguity does not affect the validity of the contract. This is because it is not possible to completely avoid some ambiguity.

Second: It is possible to avoid ambiguity without any embarrassment or hardships.

Scholars unanimously agree that what is not possible to avoid of ambiguity but with difficulty, such as ambiguity of what is found in the foundations of the walls, what is inside the stomachs of animals, or fruit at the end of the season which is made up of a mixture of good and not good fruit is tolerated and exempted.

Third: Something which is considered ambiguous as it is not a public necessity.

Public needs are considered as a necessity. Anything whose avoidance results in harm to one’s circumstances or money is considered a necessity. So, if the needs of the people dictate that they have to carry out transactions in which there is some ambiguity and there is no other substitution for such transactions, the ambiguity is pardoned.

The proof used by scholars on the permissibility of necessary transactions that entail some ambiguity is that the Prophet (peace be upon him) allowed people to buy the fruit that were left on some palm trees after it had appeared that they could be eaten but before they were fully ripe, even if some of the fruit would appear later after buying. So this indicates the permissibility of ambiguity in transactions that are necessary.

Four: the ambiguity is basic in the transaction, not secondary to the main item being sold

Secondary ambiguity is forgiven as it is only secondary, being present only with another transaction (the main item being sold), i.e. not present by itself.

This is because the Prophet (peace be upon him) allowed one who was buying a palm tree to also buy its fruit, which meant he bought the fruit before it was ripe, but just because he bought the palm tree the fruit was on. It has become clear that it is permissible for there to be slight ambiguity in goods when they are included as part of another sale, although such ambiguity would not be acceptable if the same goods were bought by themselves.

Fifth: The Ambiguity is in exchange contracts or those that are similar to exchange contracts, like marriage contracts.

As for donations, like charity, gifts and expiations, the correct view is that ambiguity can be present in such donations.

But cheating, deceit, and unfair over-pricing are foul and forbidden deeds that cause you to sin, O Muslim investor.

Cheating and deceit entail hiding defects in the goods or explaining them in a way which is different than they actual are etc.. it deceives the buyer and makes matters not clear for him, which is totally forbidden in the Islamic legislation.

A hadith reported in Muslim and related by Abu Hurairah states that the Prophet (peace be upon him) passed by a large bag of food, and he put his hand into the bag. His fingers became wet, so he said to the owner of the food, “What is that, O owner of the food.” The owner replied, “Rain from the sky fell on it, O Messenger of Allah.” The Prophet (peace be upon him) said, “You should have put them on top for people to see! Whoever cheats is not from me.”

An example of deceit is to not make clear the current price of the goods. This is why the Prophet (peace be upon him) prohibited people from meeting the caravan which has just entered the town (to buy from them) and he also prohibited the selling of goods by a townsman on behalf of a man from the country-side or desert

Furthermore, he (peace be upon him) prohibited the people from artificially inflating prices.

An example of one hadith is what Malik reported from Nafa’ who reported from Ibn Omar (may Allah be pleased with them both) that the Prophet (peace be upon him) prohibited artificial inflation of the prices of goods (Agreed upon).

As for unfairly over-pricing goods, it is sinful and it entails goods which people do not normally over-price. Such over-pricing does not occur except if the seller is unclear, tries to fool the buyer or hide the current price of the goods. If it resulted from not being clear or other reasons similar to those stated above, it is obligatory to decrease the price to the correct value, but if this over-pricing resulted from other reasons, it is only preferred to decrease the price.

Allah says, “O you who believe! Do not consume your property among yourselves in vanities; rather, let there be among you traffic and trade by mutual good-will. [And do] not kill (or destroy) yourselves; for truly Allah has been to you Most Merciful” (Surah Al-Nisai’: 29).

Prohibition of monopolizing goods: Muslim has reported an authentic hadith which was related by Said ibn Al-Museeb from  Ma’mar ibn Abdullah that the Prophet (peace be upon him) said, “No one monopolizes goods but the sinner” (Muslim).

Monopolization covers everything whose hoarding harms the people, either foodstuffs or other goods, but the sin in hoarding foodstuffs is worse due the greater need for them.

The prohibition of anything that entails co-operation in being disobedient to Allah:

Selling anything that helps people to sin against Allah is prohibited, like selling juice to a person who will use it to make wine, selling glasses to a person who will drink wine from them, selling weapons during times of tribulations or to those who are involved in a war, selling silk for a man to wear, or selling a short dress to an un-veiled woman who will wear it outside in front of men.

Such transactions are prohibited when it is clear they will lead to disobedience against Allah, as it entails co-operation in carrying out sin and evil. What is considered to be ‘clear’ in order for such transactions to be prohibited is when the buyer is fairly certain the goods will be used in prohibited ways. This is because legal rulings are determined by facts those involved are fairly certain about. Deciding legal matters based on probable details instead of facts that people are fairly certain about leads to corruption.

If one is not sure or fairly certain about the details of such transactions, but only doubts and thinks their use in sin is only probable, then such a sale transaction is doubtful, and it is better to avoid it if one is able to. This is because there are those who like to avoid doubt and there are others who like to take Allah’s licenses.