Development of Islamic Commercial Transactions

• In pre-Islamic period Mecca and Medina were the centres of

commercial activities( camel breeding, agriculture,trade)
• Mecca was a centre for trade because of the Ka’bah which
attracted crowds of pilgrims of Arabian tribes.
• The Meccan merchants were mainly Quraysh who
developed international trade and trade treaties with Syria
(in summer) and Yemen (in winter).
• The Quran says:
}…‫ب اه اذا الْبا ْيت‬
َّ ‫ف فا لْيا ْعبُ ُدوا ار‬ َّ ‫الشتا إاء او‬
‫الص ْي إ‬ ‫) إ ايَلفإ إهم إرحلاةا إ‬1( ‫ش‬
ْ ْ
‫{ إإِل ايَل إ‬
ٍ ْ‫ف قُ اري‬

“Their protection during their trading caravans in the winter

and the summer So let them serve the Lord of this House..”
(106:1-3)
- However, there was a commercial and economic injustice.
Therefore, the Qur’an condemned the use of false weights
and measures:
‫) أ ااَل ياظُ ُّن أُولائإ ا‬3( ‫وه ْم ُُيْ إس ُرو ان‬
)4( ‫ك أ َّاَّنُ ْم ام ْب عُوثُو ان‬ ‫َّ إ‬ ‫ويل لإل إ إ‬
ُ ُ‫) اوإ اذا اكال‬2( ‫َّاس يا ْستا ْوفُو ان‬
ُ ُ‫وه ْم أ ْاو اوازن‬ ‫ين إ اذا ا ْكتاالُوا اعلاى الن إ‬
‫) الذ ا‬1( ‫ني‬ ‫ْمطافف ا‬ُ ٌ ْ‫ا‬
‫وم النَّاس لإر إ‬ ‫لإي وٍم اع إ‬
‫ب ال اْعالا إم ا‬
)6( ‫ني‬ ‫ُ ا‬ ُ ‫ق‬
ُ ‫ي‬
‫ا‬ ‫م‬
‫ا‬ ‫و‬
ْ ‫ي‬
‫ا‬ ) 5( ٍ
‫يم‬‫ظ‬ ْ‫ا‬
“Woe to those that deal in fraud, those who, when they have to
receive by measure from men, exact full measure, But when
they have to give by measure or weight to men, give less
than due ”. (83: 1-6) and others:(6:152, 55:8-9).
Similarly usury (riba), gambling and bribery were
prohibited: (30:39, 2:275, 278-279), (5:90, 2:219), (2:188)
The Quran also commanded that any deposit should be
returned faithfully to its owner: }‫{إ َّن َّاَّللا اَي ُْم ُرُك ْم أا ْن تُ اؤدُّوا ْاْلاام ااَن إت إ اىَل أ ْاهلإ اها‬
(4:58) and all obligations are to be fulfilled (5:1)
‫{َي أايُّها الَّ إذين آمنُوا أاوفُوا إِبلْع ُق إ‬
}..‫ود‬ ُ ْ ‫ا ا‬ ‫ا ا‬
But Islam accepted what did not contradict with Shari’ah (ex: Salam)
 Some Principles of Commercial Transactions
1) The Principle in transactions is Permissibility
Commerce and trade are areas where creativity and innovation
are needed in order to meet the needs of changing times.
Accordingly, new forms of transactions could be
introduced provided they do not have prohibited elements.
2) Liability Justifies Gain (al-kharaj bi al-dhaman)
A person, who obtains the benefit of a thing, takes upon
himself also the loss from it (ex: Mudharabah)
3) When it is Forbidden to take a thing it is also Forbidden
to give it
It is prohibited to take usury and bribe it is also prohibited to
give usury and bribe.
 ‫‪NEGATIVE ELEMENTS IN TRANSACTIONS‬‬
‫)‪Usury or Interest (Riba‬‬
‫‪The Quran says:‬‬

‫س ۚ َٰاذلإ ا‬
‫ك‬ ‫الش ْيطاا ُن إم ان ال اْم إ‬ ‫وم الَّ إذي ياتا اخبَّطُهُ َّ‬ ‫ومو ان إََّل اك اما يا ُق ُ‬ ‫ق‬
‫ُ‬
‫ا ا ُ‬ ‫ي‬ ‫َل‬‫ا‬ ‫ِب‬‫ر‬‫إ‬ ‫ال‬ ‫ن‬
‫ا‬ ‫و‬ ‫ل‬
‫ُ‬ ‫ك‬
‫ُ‬ ‫ْ‬
‫َي‬
‫اا‬ ‫ين‬ ‫{الَّ إ‬
‫ذ‬
‫اءهُ ام ْو إعظاةٌ‬ ‫ج‬ ‫ن‬ ‫م‬ ‫ا‬‫ف‬ ‫ۚ‬ ‫ِب‬‫ر‬‫إ‬ ‫ال‬ ‫م‬ ‫ر‬‫َّ‬ ‫ح‬ ‫و‬ ‫ع‬ ‫ي‬ ‫ْب‬
‫ل‬ ‫ا‬ ‫ه‬ ‫َّ‬
‫ل‬ ‫ال‬ ‫ل‬‫َّ‬ ‫اح‬‫أ‬‫و‬ ‫ۚ‬ ‫ِب‬ ‫إ‬
‫ر‬ ‫ال‬ ‫ل‬ ‫ث‬
‫ْ‬ ‫م‬‫إِبا ََّّنُم قاالُوا إ ََّّناا الْب يع إ‬
‫اْ ا ا ا ا ا ا ا ا‬ ‫ُ‬ ‫اْ ُ ُ ا ا ا‬ ‫ْ‬
‫اب النَّا إر ۚ‬ ‫ح‬ ‫اص‬ ‫أ‬ ‫ك‬ ‫إ‬
‫ئ‬ ‫ا‬
‫َٰ‬‫ل‬‫ُو‬‫أ‬‫ا‬‫ف‬ ‫اد‬ ‫ع‬ ‫ن‬ ‫م‬‫و‬ ‫ۚ‬ ‫ه‬‫إ‬ ‫َّ‬
‫ل‬ ‫ال‬ ‫ىَل‬
‫ا‬ ‫إ‬ ‫ه‬ ‫ر‬ ‫ام‬ ‫أ‬‫و‬ ‫ف‬‫ا‬ ‫ل‬
‫ا‬ ‫س‬ ‫ا‬ ‫م‬ ‫ه‬ ‫ل‬
‫ا‬ ‫ف‬
‫ا‬ ‫ى‬ ‫ه‬ ‫انت‬ ‫ا‬‫ف‬ ‫إ‬
‫ه‬ ‫إ‬
‫ب‬ ‫ر‬
‫َّ‬ ‫ن‬ ‫م‬‫إ‬
‫ا ْا ُ‬ ‫اا ْ ا ا‬ ‫ا ا َٰ ُ ا ا ا ْ ُ ُ‬
‫ب ُك َّل‬ ‫ات ۚ اواللَّ هُ اَل ُإُي ُّ‬ ‫ُه ْم فإ ايها اخالإ ُدو ان ﴿‪َ ﴾٢٧٥‬ياْ اح ُق اللَّ هُ ال إر اِب اويُ ْرإِب َّ‬
‫الص ادقا إ‬
‫الص اَل اة اوآتا ُوا َّ‬
‫الزاكا اة‬ ‫ات اوأاقا ُاموا َّ‬ ‫اِل إ‬ ‫الص إ‬
‫َّ‬ ‫وا‬ ‫ل‬
‫ُ‬ ‫م‬‫اك َّفا ٍر أاثإ ٍيم ﴿‪ ﴾٢٧٦‬إ َّن الَّ إذين آمنُوا و اع إ‬
‫ا‬ ‫ا ا ا‬
‫آمنُوا‬ ‫ين‬ ‫ذ‬‫ف اعلاي إهم واَل هم اُْيزنُو ان ﴿‪َ ﴾٢٧٧‬ي أايُّها الَّ إ‬ ‫و‬ ‫خ‬ ‫َل‬ ‫و‬ ‫م‬ ‫اجر ُهم إعن اد ر إِبإ‬
‫ا ا‬ ‫ا‬ ‫ا‬ ‫ا‬ ‫ُ‬
‫ْا ْ‬ ‫ْ‬ ‫ٌ‬ ‫ا‬
‫ا ْا ْ‬ ‫ا‬ ‫اَلُ ْم أ ْ ُ ْ‬
‫ني ﴿‪ ﴾٢٧٨‬فاإ ن ََّّلْ تا ْف اعلُوا فاأْ اذنُوا‬ ‫إ‬
‫ن‬ ‫اتَّ ُقوا اللَّ ه و اذروا ما ب إقي إمن ال إرِب إن ُكنتم ُّم ْؤإ‬
‫م‬
‫ا‬ ‫ُ‬ ‫اا ُ ا ا ا ا ا‬
‫وس أ ْام اوالإ ُك ْم اَل تاظْلإ ُمو ان اواَل‬ ‫ء‬ ‫ر‬ ‫م‬ ‫ك‬
‫ُ‬ ‫ل‬
‫ا‬ ‫ف‬
‫ا‬ ‫م‬ ‫ت‬ ‫ب‬ ‫ت‬
‫ُ‬ ‫ن‬ ‫إ‬ ‫و‬ ‫ۚ‬ ‫إ‬
‫ه‬ ‫إ‬
‫ول‬ ‫س‬ ‫ر‬ ‫و‬ ‫إ‬
‫ه‬ ‫َّ‬
‫ل‬ ‫ال‬ ‫ن‬ ‫إ‬
‫م‬ ‫ب‬ ‫ٍ‬ ‫ر‬ ‫ِب‬‫إ‬
‫ْ ُُ ُ‬ ‫ْ‬ ‫ُ‬ ‫ْ‬ ‫ا‬ ‫ُ‬ ‫اا‬ ‫ا‬ ‫ْ‬ ‫ا‬
‫تُظْلا ُمو ان|البقرة‪}279:‬‬
“Those who consume interest cannot stand [on the Day of
Resurrection] except as one stands who is being beaten by Satan into
insanity. That is because they say, "Trade is [just] like interest." But
Allah has permitted trade and has forbidden interest. So whoever has
received an admonition from his Lord and desists may have what is
past, and his affair rests with Allah. But whoever returns to [dealing in
interest or usury] - those are the companions of the Fire; they will
abide eternally therein. (275) Allah destroys interest and gives
increase for charities. And Allah does not like every sinning disbeliever.
(276) Indeed, those who believe and do righteous deeds and establish
prayer and give zakah will have their reward with their Lord, and
there will be no fear concerning them, nor will they grieve. (277) O
you who have believed, fear Allah and give up what remains [due to
you] of interest, if you should be believers. (278) And if you do not,
then be informed of a war [against you] from Allah and His
Messenger. But if you repent, you may have your principal - [thus] you
do no wrong, nor are you wronged.” (2:279).
Hadith:
َ‫ح َُر َوقَتْ ُلَ النَّ ْف ِس‬
َْ ‫الس‬
ِ ‫اّلل َو‬ ِ ‫ن قَا ََل‬
ََِّ ‫الش ْركَُ ِب‬ ََّ ‫ّللا ََو َما ُه‬ ُ ‫ت قَالُوا يَا َر‬
ََِّ ‫سو ََل‬ َِ ‫س ْب ََع ا ْل ُمو ِبقَا‬
َّ ‫اجت َ ِنبُوا ال‬
ْ
َُ ‫ف َوقَ ْذ‬
‫ف‬ َِ ِ‫الربَا َوأَ َْك َُل َما َِل ا ْليَت‬
ََّ ‫يم َوالتَّ َو ِلي يَ ْو ََم‬
َِ ‫الز ْح‬ ِ ‫ق َوأ َ ْك َُل‬َِ ‫إّل ِبا ْل َح‬ ََّ ‫الَّتِي َح َّر ََم‬
ََّ ُ‫ّللا‬
)‫ت» (البخاري ومسلم‬ َِ ‫ت ا ْلغَافِ ََل‬َِ ‫ت ا ْل ُم ْؤ ِمنَا‬
َِ ‫صنَا‬َ ‫ا ْل ُم ْح‬
“Avoid seven destructive sins: worshiping other than with Allah;
sorcery; killing the life which Allah has forbidden
except for a just cause; eating up usury (Riba); eating up an
orphan’s property; turning back to the enemy at the battle-field
at the time of fighting; accusing chaste women who are good
believers and never even think of anything touching chastity"
Riba leads to exploitation and poverty whether the creditor is an
individual, countries, or institutions such as IMF. The nations
who borrow on interest from the IMF will have generations born
as borrowers.
 Two types of riba:
a) Riba in credit (riba al- nasiah)
Riba literally means increase in anything or an addition.
Technically, riba al- nasiyyah refers to the additional fixed
amount, which a debtor pays to his creditor in consideration
of the time he was given to use the creditor’s money.
Riba usually arises in perishable and homogeneous properties
such as gold, silver, money, dates, salt, etc. But lending and
borrowing of these properties is allowed.
This type of riba is prohibited by the Quran (30:39; 4: 160-1;
3: 130; and 2: 275-281).
The Messenger (pbuh) said that: “Allah cursed the accepter of
interest and its payer, and one who records it, and the two
witnesses” (Bukhari and Muslim)
- Some scholars have differentiated between usury and interest
by saying that:
- Usury: loans for consumption (daily needs) - Haram
- Interest: loans for production (business) – Halal
- However, this opinion is not acceptable because there is a
great possibility that money borrowed for the sake of
business will be lost, therefore, both usury and interest
remain Haram.
- Loans should not be granted for productive purposes. The
parties, instead, should enter into musharakah or
mudharabah contracts where they have to share profit and
loss on more equitable terms
 b) Riba on cash (riba al- fadhl)
This type of Riba is prohibited by Hadiths, one of them is:
‫"الذهب ِبلذهب والفضة ِبلفضة والرب ِبلرب والشعري ِبلشعري والتمر ِبلتمر وامللح ِبمللح مثَل مبثل يدا بيد فمن زاد أو استزاد فقد‬
.‫فإذا اختلفت هذه اْلصناف فبيعوا كيف شئتم إذا كان يدا بيد " رواه مسلم‬...“ .‫أرىب اآلخذ واملعطي فيه سواء” رواه مسلم‬

”Gold is to be paid by gold, silver by silver, wheat by wheat, barley by

barley, dates by dates, salt by salt, like by like, payment being made
hand to hand. He who made an addition to it, or asked for an
addition, in fact dealt in usury. The receiver and the giver are equally
guilty” (Muslim).
“ …But if the commodities differ, then you may sell as you wish,
provided that the exchange is hand-to-hand.“ (Muslim)
- Zahiri school argues that Riba al-fadhl may only happen with regard to
these six specific commodities.
- Majority of the four schools, however, argue that the meaning of the
Hadith does not confine to these six commodities only but can be
applied to other commodities through Analogy (Qiyas)
 Al-Sarf = Exchange = (‫)الصرف‬
- From time immemorial Gold and Silver were used as moneys
and they had their intrinsic values, however, later they were
substituted by paper moneys which played almost similar
role
- Al-Sarf is a sale of price for price
Conditions:
1) Immediate possession of exchanged prices (before parting)
2) Option of defect but NOT option of condition is allowed
3) No postponement is allowed for ribawi items because it will
lead to Riba al-Fadhl as stated in Hadith
 2) Uncertainty (gharar)
- Leads to disputes and disagreements between the parties.
The Quran says: ‫{واَل اَتْ ُكلُوا أاموالا ُكم ب ي نا ُكم إِبلْب إ‬
}‫اط إل‬‫ْ ا ْ اْ ْ ا‬ ‫ا‬
“Do not eat your property among yourselves falsely” (4:29)
Imam Malik in his Muwatta mentioned an example of a
person who has lost his camel the price of which is (say)
fifty dinar. The owner offers his runaway camel for twenty
dinar. If the purchaser finds it the seller loses thirty dinar.
However, if the camel is not found the purchaser loses
twenty dinar.
Uncertainty in some contracts may arise when the pillars are
not clearly defined (ex: subject matter is non-existent, not
deliverable, cannot be acquired or is not clearly defined)
However, small uncertainty is allowed (ex: time at car park)
 3) Gambling - Maysir or Qimar
- Means to obtain something too easily
- It applies to all activities when risk is taken and which are
based on chance (ittifaq).
- According to Ibn Taymiyyah, gharar leads to maysir and
consequently to hatred and enmity.
4) Deception – Al-Ghubn
- Usually happens due to the ignorance of the buyer as to the
true price of the commodity. Two types of deception:
1) Slight deception: less than 10% of the price
2) Serious deception: more than 10%
If deception is serious, the contract can be invalidated on that
ground.
 Opinions of Scholars

- Hanafis: mere deception does not invalidate the

contract unless if there is taghrir (wrong prescription)
- Hanbalis: any deception or talaqqi rukban or najash
invalidate the contract because a buyer relies on the
honesty of a seller, so he has right to return it.
- Shafi’is: contract is valid, a cheated person should
have known the actual price.
 5) Void Conditions
Any transaction in which one person’s gain results loss for
another person is unlawful.
Ex: a person is not allowed to sell an item on the condition
that the purchaser sells him something else to replace it; or
when a loan is given on the condition that the borrower
should buy a certain item from the lender.
Such conditions are null and void.
6) Haram Properties
-Property on which a contract is concluded should be valuable
(mutaqawwim) and permissible. Wine, intoxicants, pigs,
blood, idols, crosses, and statues are not valid properties for
Muslims. However, for Non-Muslims they are valid.
-Purpose of a contract should be lawful (ex: house-gambling)