IMU252

Islamic Investment

Topic 5.0
Ethics in Islamic
Investment

Prepared by:
Ustazah Noor Hasyimah Bt. Sulaiman
Learning Outcomes

At the end of topic, students

should be able to:

• Explain about the important of

ethics in investment and the
applications of ethics in investment.

• The prohibitions elements in

Islamic investment.
List of Contents

5.1 Introduction to Concepts of Ethics in

Investment
5.2 Important of Ethics in Investment

5.3 Muslim Investor Ethics

5.4 Prohibition Elements In Islamic Investment

5.4.1 Riba
5.4.2 Gharar
5.4.3 Maisir
5.4.4 Tala’ub
5.4.5 Ihtikar
5.4.6 Najsh
5.4.7 Tadlis
5.1 Introduction to Concepts of Ethics in
Investment
 5.1.1 Introduction

Generally, investment decisions are based solely on financial

criteria such as risk and returns. However, over the last few years
many investors have started considering a new dimension, that is,
the ethical nature or, more generally, the social responsibility
attached to their investments.
If the role played by the religion and spirituality in the modern
world is weak, it would be because other forces have squeezed
them out, either assuming their role or making fulfilment of their
purpose impossible.
There are an increasing number of investors who seek to align
their investments with their principles through ethical and socially
responsible investment.
 5.1.2 Definitions of Ethics

Ethics is a set of Cussen (2019) define

moral principles that ethics in three ways:
distinguish what is Oxford Learner’s • A system of moral
Dictionaries: principles.
right from what is
• Ethics is a • The rules of conduct
wrong (Elmelki Anas, as used by a specific
2009) . system of moral group or culture.
principles or • A branch of
Ethics evaluates rules of philosophy dealing
human practices by behavior. with values relating to
calling upon moral • The rules of human conduct, with
conduct respect to the right
standards; also it may
recognized in and wrong of certain
give prescriptive actions and their
advice on how to act respect of a respective motives
morally in each class of human and consequences.
situation. actions.
 Cont… 5.1.2 Ethical Investment

Ethical investors
typically avoid Analyzing investments
Ethical investing investments from sin according to ethics
refers to the practice stocks, companies should also include
of using one's ethical involved with reviewing whether the
principles as the stigmatized activities, company's actions
primary filter for the such as gambling, align with their
selection of securities alcohol, smoking, commitment to ethics
investing. riba and others. and their historical,
current, and projected
Choosing an performance.
investment based on
ethical preferences
is not indicative of
the investment's
performance.
5.1.3 Ethics From Islamic View

From an Islamic point of view, ethics is related to several

Arabic terms. These terms are as follows: ma‘ruf
(approved), khayr (goodness), haqq (truth and right), birr
(righteousness), qist (equity), ‘adl (equilibrium and justice,
and taqwa (piety).

Good actions are described as salihat and bad actions

are described as sayyi’at. However, the term that is most
closely related to ethics in the Quran is akhlaq (singular, k
huluq) (Beekun, 1996).

Even though ethics is defined as what is right and wrong,

the most pressing issue is how is one to know the right
from the wrong (Velasquez 2006).
Cont… 5.1.3 Ethics From Islamic View

In Islam, ethics can be defined as the good

principles and values based on the Islamic
sources (Mohammed 2011). These ethics
are consistent with the ability of human
beings (Al-Ghazali 2001).

It also covers all aspects of life (Al-

Qaradawi,1994). It is important to highlight
the importance of ethics in Islam when
discussing ethical issues. Islamic worships,
which can be defined as religious deeds
and actions ordered by Allah s.w.t to get His
acceptance (Yaken, 2006), are designed to
improve and protect ethics (Al-Banna 1940; Al-
Qaradawi1985, 1994, 1996).
Cont… 5.1.3 Ethics From Islamic View

Ethics is related to faith (iman). Iman is the

religious feelings that result from following what Allah
s.w. tasks Muslims to do (Al-Banna, 1940).

Iman is the power that improves and protects ethics

(Al-Qaradawi 1994; Mawdudi 1977; Yaken 2006) and
Iman is not acceptable in the eyes of Islam without
connecting it with good deeds (Al-Ghazali 2001). It
means that strong faith generates a good character
and weak faith results in a collapse of morality.
 5.1.4 Evidences

“O mankind, indeed We have created you from male and female

and made you peoples and tribes that you may know one anoth
er. Indeed, the most noble of you in the sight of Allah is the most
righteous of you. Indeed, Allah is Knowing and Acquainted”
(al –Hujurat: 13).
 Cont…. 5.1.4 Evidences

Abdullah ibn Mas’ud reported: The Messenger of Allah, peace and

blessings be upon him, said:

‫صدُق‬ ْ ‫ل َي‬ ُْ ‫ل الرْ ُج‬ُْ ‫الصدْقَْ َي ْهدِي ِإ َلى ْال ِب ِرْ َو ِإنْ ْال ِبرْ َي ْهدِي ِإلَى ْال َجن ِْة َو َما َيزَ ا‬
ِ ْ‫ق فَإِن‬ ِ ‫علَ ْيكُ ْْم ِب‬
ِْ ‫الص ْد‬ َ
ْ‫ور َوإِن‬ ُ ْ َ
ِْ ‫ِب يَ ْهدِي إِلى الف ُج‬ َ ْ
َْ ‫ِب فإِنْ الكذ‬ َ َ ْ ُ ً
َْ ‫صدِيقا َوإِْياك ْْم َوالكذ‬ ِ ‫ّللا‬ ِ ْ
ْ ‫َب ِعن َْد‬ ْ
َْ ‫الصدْقَْ َحتى يُكت‬ َ
ِ ‫ُُْ َويَت َحرى‬
ْ
‫َب ِعن َْد ّللاِْ َكذْابًا‬ ْ
َْ ‫ِب َحتى يُكت‬ ْ
َْ ‫حرى ال َكذ‬ َْ َ ‫ِب َويَت‬ ْ
ُْ ‫ل يَكذ‬ُْ ‫ل الر ُج‬ ُْ ‫ار َو َما يَزَ ا‬ َ َْ ‫ْالفُ ُج‬
ِْ ‫ور يَ ْهدِي إِلى الن‬

“You must be truthful. Verily, truthfulness leads to righteousness

and righteousness leads to Paradise. A man continues to be
truthful and encourages honesty until he is recorded with Allah as
truthful. And beware of falsehood. Verily, falsehood leads to wicke
dness and wickedness leads to the Hellfire. A man continues tell
lies and encourages falsehood until he is recorded with Allah as a
liar”

(Source: Ṣaḥīḥ Muslim)

5.2 Important of Ethics in Investment
 5.2 Important of Ethics in Investment

Dealing with good manner a sort of worship to Allah SWT

because a good manner as a part of faith.

A Muslim as a mirror of good manners.

To prevent from involving in activities that prohibited in Islam

such as riba, gharar and maysir.

To fulfil responsibilities as a khalifah.

 Cont… 5.2 Important of Ethics in Investment

Islamic ethics is founded on the worldview that man is

trustee and holds responsibility of being vicegerent
(khalifah).

In this understanding man existed as a result of the

divine-plan of Allah (s.w.t), based on which man is
delegated to manage and improve live on earth (ta‟mir)
according to the divine laws (wahy) of Allah (s.w.t).
5.3 Muslim Investor Ethics
 5.3 Muslim Investor Ethics

a) Invest in Halal/ Shariah Compliant Investment

b) Implement
c) Uphold Socio-
Ethical Values And
Economic Justice
Moral Principles
 5.3 Muslim Investor Ethics

5.3 (a) Invest in Halal/ Shariah Compliant Investment

• Halal investing opportunities serve as a

viable option for investors.
• Halal investing also offers Shariah compliant
investment products and assistance of
financial advisers.
• If they are investing to follow Islamic
principles and through Halal investing,
Muslim investors are prohibited from
making investments in ‘sin stocks’, which
include alcohol, tobacco, gambling, pork,
weapons, riba, gharar, maisyir etc.
Cont… 5.3 (a) Invest in Halal/ Shariah Compliant Investment

Invest in Halal Areas:

Investors must invest in halal area only.

They must not invest in the companies that involved in

productions of:
• Alcohol.
• banks, and other banking institutions involved in interest sa
me with the
• insurance companies
• gambling (casino and gambling outlets)
• pornography
• tobacco and others
*(All of these not acceptable as an investment under Shariah).
 Cont.. 5.3 Muslim Investor Ethics

Cont…. Invest in Halal/ Shariah Compliant Investment

• If investors want to invest in mix companies, they must
make sure that the companies pass the screening that
made by Shariah Advisory Council of Malaysian
Securities Commission.

• The SAC resolved that such companies, with a certain

degree of prohibited elements which do not exceed the
benchmark set by the SAC (5% and 20%, can be
included in the List of Shariah-compliant Securities by
the Shariah Advisory Council of the Securities
Commission.

• The SAC also resolved that the subject of ’umum balwa

and gharar yasir need to be considered when justifying
a company with a mix of permissible and prohibited
elements, whereby its core activity is permissible.
Cont… 5.3 Muslim Investor Ethics

Implement Ethical Values And Moral Principles

5.3(b)
In Human Behavior

Wasatiyyah:

• Wasatiyah is a derivation of an Arabic word that

loosely means excellent, moderate, just, and
professional (Ismail, Azmi, Al-Haddad, Basir, &
Nayan, 2017), and it is one of the emphasized
concepts in the primary sources of Islamic
epistemology, the al-Qur’an and the hadith (Hanapi
, 2014).

• Practising wasatiyyah is expected to improve

financial and consumption decision among Muslim’s
investors.
 Cont…5.3 Ethical Values And Moral Principles In
Human Behavior
• FAIRNESS: Ethical executives and fair and just in all dealings; Fair persons
manifest a commitment to justice, the equal treatment of individuals,
tolerance for and acceptance of diversity, the they are open-minded; they
are willing to admit they are wrong and, where appropriate, change their
positions and beliefs.

• CONCERN FOR OTHERS: Such as caring, compassionate, benevolent

and kind; they like to help those in need.

• RESPECT FOR OTHERS: Respect for the human dignity, autonomy,

privacy, rights, and benefits of all those who have a stake in their decisions;
they are courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin.
Cont…5.3 Muslim Investor Ethics

Uphold Socio-Economic Justice

5.3 ( c)

Paying zakat on wealth (investment)- 2.5%.

Giving sedeqah, waqf or hibah.

Institutional Investor: Corporate Social Responsibility

(CSR): Provide a framework is good in human
interaction with other humans and is a great guide for
companies in the running of business and social
responsibility simultaneously based on al-Quran and
as-Sunah.(A.Ghafar, Shahida and S. Aisyah, 2012).
5.4 Prohibition Elements In Islamic Investment
5.4 Prohibition Elements In Islamic Investment

5.4.1 Riba
5.4.2 Gharar
5.4.3 Maysir
5.4.4 Tala’ub
5.4.5 Ihtikar
5.4.6 Najsh
5.4.7 Tadlis
 5.4.1 Riba

(a) Introduction

The Shariah Advisory Council (SAC) resolved that

riba is one of the main criteria causing securities of
listed companies to be excluded from the SAC-
compliant list. The Islamic Instrument Study Group
(IISG), at its 5th meeting on 23 August 1995 resolved
that securities of a company whose operations and
main activity are based on riba are not halal.

Examples are merchant banks, commercial banks

and finance companies.

26
 5.4.1 (b) Definitions of Riba

• Riba is an Arabic word, derived from the verb raba

that literally means, to grow or expand‟ or increase
or inflate or excess, excess quantity, addition, an
increase of a thing over and above.
• Islamic terminology interest means effortless profit or
profit that increases the principal amount without
putting any effort. Thus, riba is an unearned income,
which comes as a growth or increase to the owner
of money.
• Riba is seen as unjustified earning where a person
could receive a monetary advantage in a business
transaction without giving a just counter value.

27
 Cont… 5.4.1(b) Definitions of Riba

• Abu al ‘Ala al- Mawdudi defined ‘riba’ as ‘a

predetermined excess or surplus over and bove the
loan received by the creditor conditionally in relation
to a specified period.

• Ibn Arabi – An excess or an increase accrued without

any equivalent monetary input.

• Ibn Jarir - All sorts of excess benefit which lender

accrues because a borrower delay or unable to return
the original loan in full at term.

28
 5.4.1(c) Stages For Prohibition of Riba In The Quran

• Riba was gradually prohibited through four stages in four

different verses in the Quran.
• Practice of giving and taking riba has been widely
practice in Arab society and regarded as part and parcel
of the business society.
• To eliminate something that have been accustomed for so
long is not an easy task.
• This approach also adopted in the prohibition of liquor.
• Arab society had been given ample time to gradually
adjust themselves.

29
Cont… 5.4.1(c ) Stages For Prohibition of Riba In The
Quran

30
Cont… 5.4.1 ( c) Stages For Prohibition of Riba In The Quran

31
Cont… 5.4.1(c ) Stages For Prohibition of Riba In The
Quran

32
5.4.1(d) Types of Riba

33
 Cont… 5.4.1(d) Types of Riba

Riba Duyun (Riba in Debt):

• Riba Duyun is debt usury that occurs in lending and
borrowing. Any unjustified increment in borrowing or
lending money, paid in kind or in money above the
amount of loan, as a condition imposed by the lender or
voluntarily by the borrower is defined as Riba Duyun.

• This kind of riba is the extra amount of money over and

above the principal of the loan and charge is either:
imposed by the lender or borrower in the contract;
promised by borrower in the contract.

34
 Cont… 5.4.1(d) Types of Riba

Riba Duyun can be classified as:

• Riba Qardh- Any predetermined benefit for the owner of
debt stated in the contract, which the debtor need to fulfil
E.g.: interest stated in loan contract.

• Riba Jahiliyyah -The surplus or excess payment above the

original debt as a penalty to the debtor due to his inability
to service the loan repayment within the stipulated time -
Real and primary form of riba -Premium paid to the lender
in return for his waiting -Giving or taking of every excess
amount in exchange of a loan at an agreed rate
irrespective of whether it is low or high E.g.: interest in
credit card transactions due to the delay in the
repayment.
35
 Cont… 5.4.1(d) Types of Riba

Riba al-Buyu’ (Riba in Sale):

• It occurs in trading transactions. A transaction

(trading/sale) in which a commodity is exchanged
for the same commodity but unequal in amount and
the delivery of at least one commodity is postponed.

• This kind of riba may occur out of an exchange

between two ribawi materials of the same kind.

36
 Cont… 5.4.1(d) Types of Riba

Riba buyu’ can be classified into two as

follows:
• Riba al-Fadl Any additional quantity or
inequality in the exchange of goods
from the similar type of the ribawi items.
(Quantity Factor)
• Riba al-Nasiah Any delay in the
exchange of the ribawi items from the
same type and category. (Time Factor)

37
 Cont… 5.4.1(d) Types of Riba

Riba buyu` occurs in the trading of ribawi products as stated

by the Prophet s.a.w. in his hadith:

Meaning: “Exchange gold for gold, silver for silver, grain for
grain, barley for barley, dates for dates, salt for salt in the
same amount and of the same type and must be handed
over in an `aqd ceremony. If what you have exchanged
differs in type, you can trade according to your wishes, but it
must be done on the spot.”
(Hadith narrated by Muslim).

38
 Cont… 5.4.1(d) Types of Riba

• In the above hadith, the Prophet s.a.w. explained a

way to trade the goods categorised as ribawi
products, such as gold, silver, grain, barley, dates
and salt.
• In general, all ribawi products mentioned in the
above hadith can be classified into two categories.
Any product possessing similar features can be
classified according to the type of riba product.
The two categories are, medium of exchange and
non-perishable staple food.

39
 Cont… 5.4.1(d) Types of Riba

• Medium of exchange – this refers to gold and silver which

are used to measure value because of their strength to
back currency. For example, gold has long been used to
back the reserves of a country, as well as the issuance of
currency. Therefore, currency is classified as a ribawi
product because it acts as a measure of value. Money is
commonly used to measure something of value (property);
and
• Non-perishable staple food – represented by grain, barley,
dates and salt, used as staple food in a certain area and
can be kept for a long time. In the Malaysian context, rice
would be included as a ribawi product.

40
 Cont… 5.4.1(d) Types of Riba

• Riba buyu` can be avoided as explained by the Prophet

s.a.w.:

• Meaning: “The same amount and the same type of goods

must be surrendered at the `aqd ceremony. If what you
exchange is different in types, then you can exchange
according to your wishes, but it must be on the spot.”
• Based on the hadith above, Islamic jurists have set down
specific conditions for trading ribawi products with similar
`illah and type as follows:
(a) Exchange must be of the same weight or measure;
(b) Settled on the spot and handed over in an `aqd
ceremony.
41
 Cont… 5.4.1(d) Types of Riba

• If the exchange involves ribawi products of a similar

`illah but of different type, such as the exchange of
gold for silver, it must fulfil just one condition, that it
must be done on the spot and in an `aqd ceremony
but does not have to be of the same weights and
measures.

• Such conditions do not apply if the exchange

involves different ribawi products of different
categories, such as the exchange of a medium of
exchange with staple food or with non-ribawi
products or similar non-ribawi products.

42
5.4.1(e) Islamic Ruling on Ribawi Items in
Trade

43
Cont… 5.4.1(e) Islamic Ruling on Ribawi Items in
Trade

44
Cont… 5.4.1(e) Islamic Ruling on Ribawi Items in
Trade

45
 5.4.1(f) Reasons Behind the Prohibition of
Riba
a) Riba Reflects Greed And Selfishness:
• Riba reflects greed and selfishness. Taking interest is no
doubt, a greedy act.
• Riba shows tough hardheartedness and selfishness. As a
human being, it is our duty to fulfil the need of our brothers
by providing him sum and enabling him to pay back the
sum without any burden to pay more.
• Instead of helping, providing money with interest makes
the burden even bigger. In Riba, the amount of money is
multiplied in the wrong way.
• Riba also weakens the spirit of sympathy, mutual help and
cooperation and it also decreases the loving nature,
brotherhood and unity among the community. It reflects
the worship of wealth.

46
 Cont… 5.4.1(f) Reasons Behind the Prohibition of
Riba
b) Riba is a burden on borrower and causes depression:
• In conventional finance, all the risk is born by the borrower
instead of profit and loss sharing between both the parties. Debt
is a burden on the shoulders of borrower. This debt increases
due to the regular payment of interest.

c) Riba is a cause of injustice and exploitation:

• Riba is considered a form of injustice and exploitation. How it is
just to earn reward without bearing risk? It is a situation where
the lender only takes benefit of a borrower’s poor economic
condition.
• Some borrowers take a loan just to procuring things necessary
for his livelihood. Instead of helping and cooperating in his bad
time, charging interest on it shows selfishness and greediness
only.
47
 Cont.. 5.4.1(f) Reasons Behind the Prohibition of
Riba
d) Riba results in idleness and promotes unearned income:
• Taking interest brings idleness and promotes unearned income.
It also kills the spirit of entrepreneurship because instead of
undertaking business projects by using skills, knowledge, people
use to lend to earn interest. Such earning which is without risk
but regular reward creates a sedimentary life. It prevents
people from working to earn money. This is also not good for
sound economy which is based on business, commerce and
industry.

e) Riba widens the gap between rich and poor:

• The gap between a rich and poor section of the society needs
to be filled for a prosperous economy but, it can be seen in
conventional financing system that the rich are becoming richer
and poor are becoming poorer.

48
 5.4.2 Gharar

• The SAC resolved that the existence of gharar in

the main activities of a company can cause the
company’s securities listed on Bursa Malaysia to
be excluded from the list of securities approved
by the SAC.

• The IISG at its 5th meeting on 23 August 1995,

resolved that securities with gharar features are
not halal. Company activities categorized as
gharar include conventional insurance activities.

49
 5.4.2 (a) Definitions of Gharar

• In Arabic, gharar has the same meaning as khatar

which means something dangerous. It also carries
the meaning of khida` or cheating.

• In terms of terminology, gharar refers to elements of

uncertainty that can expose someone to danger. In
the context of buying and selling, if it is said that an
`aqd has the element of gharar, it means that there
is an element of uncertainty in the `aqd.

50
 Cont… 5.4.2 (a) Definitions of Gharar

• As an example, a sale and purchase contract which

does not state its price is said to possess an element of
gharar as cheating in price can occur.

• Further examples of gharar include conventional

insurance where the buyer buys something and there is
uncertainty as to whether the item bought can be
obtained or not. The item bought (insurance) will only be
claimed if an accident or disaster strikes the buyer, but
the accident or disaster may or may not happen.
Therefore, it is uncertain if the item bought by the buyer
will ever materialize.

51
 5.4.2 (b) Views of Past Islamic Jurists

• Gharar refers to something with unknown consequence. This was

the opinion of a majority of Islamic jurists.

• The Syafi`i Mazhab defined gharar as khatar (of high risks). Al-
Syirazi, a jurist in this mazhab, defines gharar as something whose
condition and consequence are unknown. Al-Ramli stated that,
gharar is something that has two assumptions, positive and
negative, with the negative being more dominant. Al-Sharqawi and
Al-Qalyubi, also jurists from the Syafi`i Mazhab, defined gharar as
something whose consequence is unknown and has two
assumptions, positive and negative, the negative outweighing the
positive.

52
5.4.2 (c) Evidences

Hadith Narrated By Muslim

 5.4.2 (d) Forms of Gharar

From the studies made

by SAC of SC, gharar
may occur in two
situations:

Sighah contract: such

as two sales and Subject contract: such
purchases in one as ma`dum sales and
transaction (bai`atain fi purchase.
bai`ah); and

54
 5.4.2 (e) Types of Gharar

Gharar is divided into two, that is gharar fahisy and gharar

yasir.

a) Gharar fahisy (plenty):

A serious and excessive gharar that contained these
elements:
• An uncertainty which is so great that is becomes
unacceptable.
• It is vague that there is no means to quantifying it.
Example: Asset or merchandise doesn't exist, can’t be
delivered, bird in the sky and selling fish which are still in the
river.

55
 Cont… 5.4.2 (e) Types of Gharar

b) Gharar yasir (a little):

• Can be found in nearly all contract.

• Thus, the sale is valid and example:
• Buying a fruit without peeling or cutting off the
skin to see inside.
• Charging a fix amount for a bus fare for a
certain distance even though a passenger
does not travel.
• Selling a house with the furniture therein which is
not accounted in detail.

56
 Cont… 5.4.2 (e) Types of Gharar

• Ulama’ unanimously say that gharar fahisy can

nullify the contract, especially `uqud
mu`awadhat and gharar yasir do not give any
effect on the contract.
• According to Muhammad Beltaji, it is
impossible for the buyer and seller to avoid
gharar completely.
• Therefore, past ulama’ differentiated between
gharar which nullifies `aqd and gharar which
can be excused based on the maxims of
Islamic jurisprudence, such as raf`u al-haraj and
la dharar wa la dhirar.

57
 Cont… 5.4.2 (e) Types of Gharar

• As a result of his study, a majority of Islamic jurists placed

three conditions on which gharar can be excused:

(a) The gharar is minor and small;

(b) Such trading is needed by society; and
(c)The gharar cannot be avoided without
masyaqqah (hardship) that is recognised by
Syara`.

58
 5.4.2 (f) Reasons for Prohibitions of Gharar

• The rationale behind the prohibition of Gharar is to

ensure full consent and satisfaction of the parties in a
contract. Without full consent, a contract may not
be valid. Full consent can only be achieved through
certainty, full knowledge, full disclosure and
transparency.
• The prohibition of Gharar protects against
unexpected losses and the possible disagreements
regarding qualities or incompleteness of information.
• The prohibition of Gharar is designed to prevent the
weak from being exploited and, thus, a zero-sum
game in which one gains at the expense of another
is not sanctioned.

59
 5.4.3 Maysir (Gambling)

• The SAC concluded that gambling is one of the

main criteria causing a listed company’s
securities to be excluded from the list of Shariah-
compliant securities by the SAC.

• The IISG, at its 5th meeting on 23 August 1995,

resolved that the securities of a company
carrying out gambling activities are not
permissible. The activities include casinos and
gaming.

60
 5.4.3 (a) Definition

• Gambling or in Arabic, qimar or maisir.

• Means any activities which involve

betting, whereby the winner will take
the entire bet and the loser will lose his
bet.

61
 5.4.3 (b) Evidences

• The prohibition of gambling is clear in the

Quran, where Allah s.w.t. commands believers
to eschew gambling by stating:

Meaning: “O you who believe! Intoxicants and

gambling (dedication of) stones, and (divination by)
arrows, are an abomination – of satan’s handiwork:
eschew such (abomination), that you may prosper.”
(Surah al-Maidah: 90)

62
 5.4.3 (b) Evidences

• From As-Sunnah “Whoever says to his

companion, come let us play a game of
haphazard should give alms (as an
atonement)”.

(Hadith narrated by Bukhari & Muslim)

63
 Cont… 5.4.3 (b) Evidences

• As gambling is prohibited by Allah s.w.t. Muslims

are forbidden to be involved in contributing
towards developing companies which carry out
trade based on gambling.

• Hence, the securities of a company whose

main activity is gambling will be excluded from
the list of SAC-compliant securities.

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 5.4.3 (c) Reasons of Prohibitions

Noble objectives behind this strict prohibition of Maysir:

• Islamic teaching urge the Muslim to follow Allah directives for
earning a living, which is direct means for the attainment of
his objectives.
• In Islam an individual’s property is sacred; it may not be taken
unless given willingly or by lawful exchange.
• Gamblers develop hatred and enmity towards one another,
although they may claim that losing does not trouble them.
• Gambling has its own compulsion – the loser plays in the
hope of winning and to regain his earlier losses, while the
winner plays again to enjoy the pleasure of winning and the
greed for more.
• Causes anxiety, illness, addiction and hostility.
• Destroys families and wastes wealth.

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5.4.3 (d) Examples
of Gambling

• Chance based
gambling: lottery,
gaming machine and
roulette.

• Skill based gambling:

horses racing and
cockfighting.

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 5.4.4 Tala’ub (Manipulation)

(a) Introduction:
• Some contemporary Muslim jurists equate
manipulation with ihtikar (hoarding), while others
equate it with najsh (artificial price hiking) and
others with tadlis (concealment of a defect).
• In other words, meaning of Tala’ub is related with
all types of deception (the act of causing
someone to accept as true or valid what is false
or invalid or the act of hiding the truth especially
to get an advantage.

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 Cont.. 5.4.4 Tala’ub (Manipulation)

• In Islam, the essential rule in business is

honesty and fair dealing, and a businessman
should, as a result, be a person of high ethical
principles (Kaliffa 2003).
• The market should be free and not subject to
manipulation and where individuals engaging
in trade and commerce should act fairly
(Lewis2006).
• Market manipulation is generally considered to
be dishonest, unethical, and often illegal.

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Cont… 5.4.4 Tala’ub (Manipulation)

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 5.4.5 Ihtikar (Hoarding)

• Literally: hide items to cause an increase in

price.
• Technically: purchasing essential
commodities then hiding them from the
market to cause an increase in price
because of the artificial dearth of supply in
the market. Ihtikar or hoarding is prohibited
on several occasions.
• The propher (SAW) said: “No one hoarding
(ihtikar)except the sinner”(Sahih Muslim)

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 Cont.. 5.4.5 Ihtikar (Hoarding)

According to Yusuf al-Qaradawi (2000, p. 358),

hoarding was forbidden if it has the criteria of the
following:

• Do it somewhere where the population will suffer

because the presence of the landfill.

• The piling is done to raise prices so that people find

it difficult and that he could profit doubled.

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 Cont… 5.4.5 Ihtikar (Hoarding)
Lessons Behind Prohibition Ihtikar:
• To prevent things that are difficult for humans in
general.
• Islam is threatening those who hoard them with a
painful punishment on the Day of Judgment. Allah
SWT says:
"And those who hoard gold and silver and spend it
not in the way of Allah: announce unto them (that
they will get) a painful punishment. On the day of
heated gold and silver was in hell Hell, and burned
with their foreheads, stomach and their backs (and
say to them): "This is your possession ye buried for
yourselves, so taste now (due to) what you save that"
(At Tawbah verse 34-35).
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 Cont… 5.4.5 Ihtikar (Hoarding)

Lessons Behind Prohibition Ihtikar:

• Treasure hoard means freezing it, hold it and keep it from
circulation.
• In fact, if the property was included in productive
ventures such as in production planning, it will create
many new employment opportunities and reduce
unemployment.
• New opportunities for this work could increase the
income and purchasing power so that it can encourage
increased production, either by making new plans and
by expanding the existing plan. Thus, it will create a
situation of economic growth and development in
society.

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 5.4.6 Najsh (Artificial Price Hiking)

• Bay' al-najash is also known as bay’ al tanajush.

• Literally: concealment or a practice in which hunters
used to rouse and chase game for the sole purpose
of trapping or snaring it.
• Technically: Imam Al-Shafi’i defined bay’ al najsh as
“the sale wherein a person bids-up the price of the
commodity with no intention of buying it, only to
induce others to buy it for more than they would
have otherwise.” (Al-Mausu’ah al-Fiqhiyyah).

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 Cont… 5.4.6 Najsh (Artificial Price
Hiking)

• It also can be referring to a sale by a

fraudulent auction or sale by a manipulative
overpricing. This sale is based on collusion
(tawatu') between a seller and a fake
bidder.
• When the customer hears the high bid and
thinks that maybe the item is worth the high
price and therefore, he purchases it.
• This is a form of deceit, falsehood and of
course fraud.

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 Cont… 5.4.6 Najsh (Artificial Price Hiking)

• Najsh is prohibited by the hadith : On

the authority of Abdullah ibn Umar
(RA): “the Prophet (SAW) forbade al-
najsh” (Sahih Bukhari).

• Islam has prohibited najsh and

encourages fair trading.

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 5.4.7 Tadlis

• Literally: concealing, deceiving or hiding

• Technically: tadlis is an act of intentional
concealment of the goods defects in a sale
transaction.
• This trick is prohibited by shariah. Prophet (SAW)
says: “Do not forcefully keep the milk in the udders
of camels and sheep, and if one buys it thus, then
he has the option after milking it, he may keep it
or return it together with a container of dates as
compensation for the milk”(Sahih Bukhari).

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Thank you

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