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It is very common for many of us to think of Islam as being a
religion that calls the believers to live a 'simple' life, a life
devoid of possessions and material wealth. We often think of the one
who has been blessed with wealth as somehow deficient in his
spirituality.
The fact of the matter is, that when we realise that Islam is indeed
comprehensive and that we as Muslims live all aspects of our lives
according to the commands and prohibitions of Allah (subhanahu wa
ta’aala), it becomes clear that Islam definitely encompasses matters
to do with poverty and wealth.
The question is, does Islam tell us to stay away from wealth and
live the 'nomadic' lifestyle of the ancient Arab tribes?
Allah (subhanahu wa ta’aala) says:
"Say: who has forbidden the beautiful gifts of Allah, which He has
provided for His servants, and the things, clean and pure, (that He
has provided)?"
[ Al-A'raf: 32]
So we find that Islam encourages us to strive to seek the provision
(rizq), and work to earn property.
We are also encouraged to enjoy our wealth as Allah (subhanahu wa
ta’aala) says:
"O you who believe! Spend of the good things which you have earned,
and of that which We bring forth from the earth for you." [ Al-Baqarah:
267]
So rather than looking down or thinking ill of people who have
wealth, we find that Islam actually encourages us to earn and enjoy
the wealth that we have. However, the issue here is that Islam
governs how we earn the wealth and also how we spend the wealth.
So 'Iqtisaad' or the 'management of property' is a fundamental part
of Islam. The rules of Iqtisaad are no different from the rules of
salah(prayer) or the rules of Hajj with respect to the fact that every
minute detail has been outlined.
For example, salah(prayer) is not simply a matter of 'praying to Allah (subhanahu
wa ta’aala)' in any which way people like. A Muslim cannot argue
that salah can be performed by 'singing' or 'wailing', nor can it be
performed by climbing a mountain or refusing to eat.
Rather salah(prayer) has a very specific appearance, which includes the
clothes that we wear, the direction that we face, the intention that
we make, the order of the surah that we recite and so forth.
However, when it comes to the issue of money and wealth, many of us
are unaware of the details of what Allah (subhanahu wa ta’aala) has
asked us to adhere to.
The widely recognised aspect of wealth acquisition and disposal from
Islam is that of riba (usury). Most Muslims around the world are
very familiar with the fact that Islam has strictly forbidden the
giving or taking of riba.
Allah (subhanahu wa ta’aala) says in the Quran:
"Those who eat Riba (usury) will not stand (on the Day of
Resurrection) except like the standing of a person beaten by Shaytan
(Satan) leading him to insanity……Allah has permitted trading and
forbidden Riba (usury).” [ Al-Baqarah: 275]
Even those Muslims that unfortunately engage in interest paying and
receiving are often aware of the fact that Allah (subhanahu wa
ta’aala) has warned us not to be involved in riba, whether that is
actually paying riba in mortgage payments, or credit cards,
receiving riba through our bank accounts and investments or
arranging any kind of finance that involves the giving or receiving
of riba.
However, many people argue that Islam does not place any hardships
on us and justify their involvement in riba as a 'necessity' or 'dharoorah'.
Allah (subhanahu wa ta’aala) mentions the issue of necessity in two
Ayaat of the Quran, in Surah Al-Ma'idah verse 3 and Surah Al-Nahl
verse 115. In each case the Ayah talks about the prohibition of Al-Maytatah,
the eating of meat from a dead animal, and the flesh of pigs and
eating meat from an animal that has not been slaughtered in the name
of Allah (subhanahu wa ta’aala). In Surah Al-Maidah, Allah (subhanahu
wa ta’aala) also addresses the drinking blood, which is forbidden.
Allah (subhanahu wa ta’aala) then allows us to eat the forbidden
items if we are in a situation which is a matter of life and death.
We are allowed to eat the forbidden meat and even drink blood, if
our lives depended on it. Furthermore, we are not allowed to
continue eating the forbidden meat or continue to drink blood when
we have the option to eat halal meat or we have the option to drink
something that is halal.
So it is clear that Allah (subhanahu wa ta’aala) gives us the 'ruksa'
(exemption) in terms of necessity, only when it is a matter of food
in relation to life and death. Therefore it is not possible for us
to apply this 'allowance' to the paying of interest, because paying
interest has nothing to do with food or drink and nor is it a matter
of life and death.
However, Iqtisaad or the management of property and wealth in Islam
is not simply a matter of avoiding riba, just as salah is not simply
a matter of intention. Rather there are many detailed principles
with regards to buying and selling, investing, spending, employment,
personal property, state property, public property, foreign trade
but to mention a few.
As Muslims, we understand the necessity of living our lives
according to rules of Islam in every detail. Before committing an
act, we understand that we must know what Allah (subhanahu wa
ta’aala) has shown us to be the correct and incorrect way of doing
the particular action.
So we find ourselves very particular about the ingredients of food.
We spend considerable time checking food packaging labels to make
sure that there is no ingredient in the food that is haram. We let
our friends and family know about which foods may contain additives
such as gelatine or alcohol, and ensure that our mothers and wives
are not stocking their shelves with potentially haram food.
But we need to ask ourselves whether we are as particular when it
comes to financial transactions that we undertake as part of our
daily living. Are we particular in finding out what Allah (subhanahu
wa ta’aala) has instructed when it comes to transactions with banks,
buying on credit, applying for credit cards, insurance or even when
applying for mortgages that are labelled as Islamic?
Just because a product is labelled Islamic does not necessarily make
it halal. We understand that conventional mortgages are forbidden
from Islam, just as alcohol is forbidden. So if Carlsberg issued a
statement that it is launching a 'halal brand of beer', we would all
be very cautious and careful in assessing whether or not it is in
fact halal, rather than quickly accept the statement and rush out to
stock our fridges!
Similarly if any bank or financial institution is claiming that a
product, which has been forbidden from Islam, is now halal, we need
to scrutinise the product from all possible angles and check all the
Shari'ah rules that apply and be completely satisfied that the
product is in fact halal.
We need to be careful that we do not look at these products from a
benefit point of view, i.e. that these products will finally mean
that we can buy houses to our heart's content and take full
advantage of the property boom. Or that, finally we can satisfy our
parents who have been unhappy at the fact that we refuse to get a
mortgage.
We need to be very clear that our aim in life is to please and
satisfy Allah (subhanahu wa ta’aala) at the cost of anything. Allah
(subhanahu wa ta’aala) says:
"But no, by your Lord, they can have no Faith, until they make you
(O Muhammad saw) judge in all disputes between them, and find in
themselves no resistance against your decisions, and accept (them)
with full submission." [ An-Nisa: 65]
And we should remember that Allah (subhanahu wa ta’aala) reminds us:
"And who so obeys Allah and the Messenger (Muhammad salAllahu alaihi
wasallam), then they will be in the company of those on whom Allah
has bestowed His Grace, of the Prophets, the Siddiqeen, the martyrs,
and the righteous. And how excellent these companions are!"
[ An-Nisa:
69]
With this in mind, if we find that these products are indeed halal,
then we accept them because they are permitted by the Shari'ah and
not simply because they benefit us. But equally, if we find that
these products are not halal, i.e. they do not fulfil the entire
Shari'ah criterion, then we reject them without any resistance in
our hearts or minds.
In order to understand these and other financial transaction, we
need to understand the products and have a working knowledge of the
principles of contract law in Islam.
The Products
Generally there are two types of schemes that currently exist on the
market, in terms of halal mortgages. The Ijara contract and the
Murabaha contract.
The Ijara contract states that an individual approaches the bank (or
financial institution) with a property which it buys from the
vendor. The buyer then agrees to pay rent and also pay towards the
capital sum of the property, over an agreed period of time. Each
month the individual pays an amount, which represents a rental sum
and a contribution towards the capital sum of the property (the
individual will also pay a sizeable deposit maybe up to 25% towards
the capital amount). At a future point in time the two parties enter
into a purchase agreement where the monies paid towards the capital
amount are then used as consideration for the purchase price. The
profit for the bank arises from the rent it charges within the lease
contract period.
The Murabaha contract states that the buyer approaches the bank with
a property which the bank buys, but then immediately inflates the
price and sells it to the buyer. The buyer than agrees to pay the
bank in instalments over an agreed period of time.
The principles
Having studied the products and understood what the banks are asking
for, by studying in detail the 'terms and conditions' and the 'small
print' that constitutes the contract we need to examine some aspects
of the Shari'ah in order for us to determine the validity of the
product.
Firstly we need to look at 'Who is buying and who is selling?'
This is because Islam has allowed us to trade but has put specific
rules for it.
One of the Sahabah, Rifa'a, narrated that he went out with the
Messenger of Allah (salAllahu alaihi wasallam) to the prayer place
and he saw the people trading. The Messenger of Allah (salAllahu
alaihi wasallam) said,
"O traders!" They responded to the Messenger of Allah (salAllahu
alaihi wasallam) and raised their necks and eyes towards him. He r
said, "Traders will be resurrected on the Day of Judgement as fujjar
(wrongdoers) except those who were righteous and honest."
So, the buyer and seller in any contract must be legitimate i.e.
must be defined by the Sharah - as an example it is not allowed for
a child or insane person to sell.
Muhammad (salAllahu alaihi wasallam) said:
"Verily trade is by mutual consent"
So, as an example of this rule, when buying a house it is important
to know whether the bank or institution in question is a Muslim
owned PLC(public limited) company. If they are, then we can't do business with them.
This rule is, quite frankly, a subject in it self, but as an
example, it is known that PLC's are not liable for any debts that
they incur. This however contradicts Islam, because Muslims are
liable for debts, even after they are dead. So, Muslims are not
allowed to form companies on the basis of a public limited company.
Hence it is imperative that we investigate who we are buying from
and we should consider the question of their validity from Islam.
Secondly we need to ask 'Does the bank or institution already own
the property?'
This is vital because we can't buy something from another party if
they are not the actual owners of that item at time of contracting.
This is known as forward selling and is not according to the
Shari'ah. You can only purchase an item from another party if they
are the owners.
Muhammad (salAllahu alaihi wasallam) said in the Hadith:
"And do not profit from that which you do not own and do not sell
that which you do not have"
Hence we are obliged to ensure when contracting with the bank that
they are the actual owners of the property, before we sign the
contract.
Thirdly we need to find out 'How many contracts are involved?'
We have to ensure that there aren't two or more contracts, put
together into one contract. It's not allowed for me to say, that I
will sell you my house, on the condition that you also buy my car
for a particular price or that, I'll sell you my house, on the
condition that you have to marry my daughter. This is not valid
because selling my house is one contract and selling my car is
another contract altogether - so this becomes two contracts in one
contract. Equally when it comes to buying a house, it's possible
that there could be more than one contract involved and we need to
be careful of this.
For example the bank or building society could sell you a house and
you agree to pay rent which also acts as payment for the house. This
is not 'Shari'ah compliant' because there needs to be a separation
between the contract of sale and the contract of rent they can't be
included as one. Rent and sale are completely different contracts
even with the same person and the same property.
Imam Ahmed narrated:
"The prophet (salAllahu alaihi wasallam) prohibited two contracts in
one contract"
Fourthly we need to ask ourselves 'Is there a penalty if I miss or
default on a monthly payment?'
Most mortgage companies have a standard clause in their term and
conditions that states that if the borrower fails to keep up
mortgage payments, then the lending company has the right to
penalise the borrower and as an ultimate resolution to continued
payment defaults, the bank has the right to 'repossess' the
property. Most people accept this condition on the premise that the
bank has the right to 'protect' the money they have lent you.
However, Muhammad (salAllahu alaihi wasallam) said:
"Whosoever sells two sales in a sale, the lesser of the two is his
or it is riba"
What is meant here, by two sales in one sale, is that, in the
original agreement, it was agreed that each month the borrower would
pay, for example £500.00. However, the bank's conditions mean that
if the borrower failed to pay his monthly instalment then the bank
will charge him an extra £50.00 for example. This extra charge will
be added to the following month's payment. So the following month
the borrower has to pay £1000.00 plus the extra £50.00.
According to Islam, this extra payment of £50.00 is riba and hence
Haram. It is in fact these charges that are added to defaulted
payments that increases the debt and makes it even more difficult
for the borrower to pay back.
Conclusion
Despite the detailed rules it is possible to have alternative
methods of purchasing a house or motorbike other than interest based mortgages.
This is an area that Muslims should explore ensuring that they stick
to the Islamic principles. We can be creative in looking for
solutions, but we can never compromise the Shari'ah rules.
In origin it is halal for someone to purchase a house or motorbike and sell it to
you at a higher price than the market value on the basis that you
will pay over a period of time.
However, it must be appreciated that there is much more for us to
consider when entering a contract than just the 'bare bones' of
Islamic economics. We need to be clear that our criterion is to
please Allah (subhanahu wa ta’aala) and not simply to benefit
ourselves.
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