Shariah Alternatives of Conventional Import/Export procedures

(Case of Pakistan)

Thesis Proposal for MS in Islamic Commercial Law

SUBMITTED BY

Ahmed Abdul Rehman

32-FSL/ MS-ICL/F-14

PRESENTED TO

The Research Committee, Department of Shariah

International Islamic university Islamabad

2015
Thesis Statement:
The present Import/Export procedure is based on the concept of conventional interest
based economy, it needs Shariah compliance. The instruments and tools used by banks in
import and export business should be modified and replaced with legitimate Shariah compliant
alternative tools which are not only possible but may perform better than conventional
instruments.
Introduction:
Today, as the world has become global, the foreign trade has increased many times.
Now every government wants to increase their export for growing up their economy, on the
other hand no country can survive without imports, they can’t depends only on their own
products. With passage of time & modern life, the importers & exporters are experiencing new
practices, therefore there is a lot of new & modern procedures adopted which needs Sharia
analysis because mostly practices have the interest elements. Now there is new ways of
contracts which is discussed by Shariah perspective but need more analysis, as well as new
methods of payments which should be checkout by Islamic law, modern modes of checking
quality & maturity like inspection & certification by different international certification
companies, latest ways of transportation which passes through insurance, intra governments
rulings, & much more which all needs shariah appraisal.

As well as With the advancement of technology & modern ways of communications,

there have been a number of importers & exporters connected directly but they can’t trust on
each other, for this purpose some institute plays important role as intermediary for completion
of this process. Banks are playing main role in this matter .In conventional system banks charge
on this interest for their profit. The Islamic banks have some practical issues in adopting Shariah
compliance procedures, so the problem in import and export procedure is interest which is
prohibited by shariah. This principle has its origins in the holy book of Muslims – Quran. The
hadiths, which describe the life and actions of Muhammad (PBUH), the Messenger of Allah, also
state that Riba is condemned.

The most important issue among other above mentioned issues, which affect the
efficiency of Islamic finance industry and impose question on the shariah compliance of the
industry as a whole, is the Documentary letters and its interest based instruments. There are
some alternative instruments to solve these Documentary letters issues.
The major problem is , banks are not working like a trade house as they argue that in
playing the role like a trade house, there is a big risk , if banks buy some goods on the demand
of any person and then if that person do not take it, there will be loss for bank so banks take
promise & put some penalty on no performance(the issues related to guarantees before
concluding a murabaha deal such as promise, hamishjidiyyah(security deposit) and issues
relating to guarantee for recovery of debt created by murabaha transaction ,documentary
credits).So I want to present alternatives about import transactions by Islamic ways in banks
that is banks should act as a trade house & we will categorize all imports in three major types;

• General items (where is no risk about their market)so these items banks will purchase
by themselves & they will sale these items by themselves

• 2. Industrial goods / inputs (which is used by industrial importers ) so banks will sign a
contract with importers of Astana that the bank will purchase these goods & will give to
the industry & industry will give them in compensation the finished goods as their sole
agents

• 3. Remaining item s banks will open L/C account on full cash with service charges(in this
banks also can get the imports business expert services and pay them from these
charges).

Literature review:

• Islamic law and the Finance of International Trade by Alice de jonge, Monash
University(Australia)

The author describe in this article the practices which is in conventional banking & there
alternatives which is used by Islamic banks, he also highlight shariah issues Islamic
banking system, but as this article is written in 1996, so now there is a change in
practices.
 • PRINCIPLE OF STRICT COMPLIANCE IN LETTER OF CREDIT: A COMPARATIVE STUDY
FROM LEGAL AND SHARIAH PERSPECTIVE by Rosmawani Che Hashim, University of
Malaya and Ahmad Azam Othman & Akhtarzaite Abdul Aziz, International Islamic
University Malaysia.

In this article the author discuss the Shariah status of L/C documents; are the
documents can take place of physical goods, but he don’t describe other aspects of
business.

• DIFFERENCE BETWEEN ISLAMIC BANKING AND REGULAR BANKING IN INVESTMENT

AREA By Farhana Kabir Liza INDEPENDENT UNIVERSITY, BANGLADESH

In this article, there is discussion on investment by banks, but only a little discussion on
import business which is not enough on subject.

• A REPORT ON CREDIT APPRAISAL PROCESS OF EXPORT IMPORT BANK OF BANGLADESH

LTD. Prepared By Shirmin Sultana Sonia

The author only present report on export/Import business financed by bank of

Bangladesh.

• An Overview of Shariah Issues Regarding the Application of Islamic Letter of Credit

Practice in Malaysia by Ahmed Azam Usman, Rosmavani and akhtarzaite.

In this article the author describe different modes of financing import/export business
by Islamic banks & the shariah issues in the field, but he didn’t present there
alternatives.

Objectives:

1: To evaluate the current import and export procedures with respect to Sharia
requirements.

2: To suggest the alternative instruments for import transactions of Islamic banks.

 3: To present the Shariah based alternatives in import and export procedures.

Research Questions:

• What are the procedures of import and export business?

• What are the tools of facilitating import and export business used by Islamic banks?

• Are these procedures & tools Sharia compliant?

HYPOTHESIS:
Import/Export business is being practiced in broader way, the gap between Shariah
compliant and present practices has to be identified in order to make Import/Export
Procedures fully Shariah compliant, so that all the issues through which any kind of
interest is found will be highlighted in order to make it totally based on Shariah.
Research Methodology:

It is library and field based research and partially based on questions which will be
taken from importers & exporters. The research will be also an empirical study on the
primary data that will be collected through questioner and audit report of trading
institutions. I will use qualitative & quantitative research methodology, principally
composed of literatures, legal documents, scholarly articles, Article of Agreements,
guiding principles, policies and programs, reports released on the subject matters and
the existing procedure of practice in Pakistan. I will try to look over the significance and
the legal status of the issue in the light of settled rules of Shariah. A comparative
analysis of literature as well as feedback from questioner will be taken into
consideration while research is being done.

Scope and limitations:

We have adopted this topic as it is so important in this time, a great part of our today
business is import/export business. So in this study the procedures of import and
export will be studied with Islamic and modern approaches. I will discuss
 major/general issues of import/export business generally, specifically in Pakistan
scenario.

Tentative outline

Introduction:

1. Introduction

2. Literature review

3. Objectives

4. Research Questions

5. Hypothesis

6. Methodology

7. Scope and limitations

Chapter 1:

Introductions to import and export procedure

1.1: Definition of import

1.2: Definition of export

1.3: Offer & Acceptance

1.4: Payments

1.5: Delivery/ Transportation

1.6: Documentation

1.7: Summary

Chapter 2:
Documentary letters in conventional banking system

2.1: Necessity & introduction to documentary letters

2.2: Parties of documentary letters

2.3: Kinds of documentary letters

2.4:Summary

Chapter 3:

Documentary letters in Islamic banking system

3.1: Shariah Issues in Conventional banks

3.2: Suggested alternatives for conventional D.C

3.3: Practices by Islamic banks

3.4: Improvements in documentary letters

3.4.1: Istisna based alternative

3.4.2: Investment agency based Documentary letters

3.4.3: Partnership based Documentary letters

3.4.4: Modharba based Documentary letters

3.5: Summary

Chapter 4:

Laws of import export procedures

4.1 laws regarding to ownership/ possession

4.2 laws regarding to Quality problems (Khayyar e royat, khayarEib etc.)

4.3 laws relating to disputes

Chapter 5:

Shariah appraisal for law requirements in import and export

5.1 Insurance

5.2 Certifications

5.3 Inspection & Packaging

5.4 Smugglings

Conclusion and recommendation.

Proposed Bibliography

1. AAOIFI. 2010.Sharia's Standards . Manama, Bahrain : Accounting and Auditing

Organization for Islamic Financial Institutions, Manama, Bahrain, 2010
2. AI-Jahri, Mabid Ali M.M.(1987) The Relative Efficiency of Interest-Free
Monetary Economics; view of Islamic Economics, Vol. 1(2): 1-20.

3. Alice de jonge , Islamic law and the Finance of International Trade , Monash
University(Australia)

4. Ahmed Azam Usman, Rosmavani and akhtarzaite , An Overview of Shariah Issues

Regarding the Application of Islamic Letter of Credit Practice in Malaysia.

5. Mansoori, Dr. Muhammad Tahir. 2011. Islamic Law of Contracts and Business
Transactions. Islamabd, Pakistan : Shariah Academy, International Islamic
University.

6. Nyazee, Imran Ahsan Khan. 2005.Outlines of Islamic Jurisprudence.

Rawalpindi,  : Federal Law House, Main Plaza, Chandni Chowk, Rawalpindi
Pakistan.

7. Siddiqi, Muhammad Nejatullah. 2009. Maqaside Shariah. Islamabad, Pakistan :

Islamic Research Institute, International Islamic University.
 ‫رسالة الماجستير بعنوان ‪:‬‬

‫"البدائل الشرعية لطرق اإليراد واإلستيراد التقليدية"‬

‫أهمية موضوع البحث‪:‬‬

‫"وهو من الموض==وعات= المهمة ال==تي تحت==اج إلى بحث و تك==ثر الحاجة إلى معرفتها الس==يما في العصر‬
‫الحاضر الذي قد اتس==عت فيه العالق==ات التجارية بين األمم‪ ،‬وتع==ددت معها أن==واع التعامل بين الن==اس‬
‫واستجدت معامالت لم تكن معروفة من قبل‪.‬‬

‫‪:‬‬ ‫وأما األهداف التي دفعته للكتابة في الموضوع فلخصها الباحث فيما يلي‬
‫‪   -1‬بيان األحكام الشرعية المتعلقة باإليراد و اإلستيراد وجمعها بين دفتي رس==الة علمي==ة واح==دة مم==ا‬
‫يُسهل على القارئ والباحث الرجوع إليها‪.‬‬
‫‪   -2‬بيان سماحة اإلسالم في التجارة‪ ،‬وأن شريعته صالحة لكل زمان ومكان و أمة‪.‬‬

‫اآلتية‪:‬‬ ‫كما لخص الباحث أسباب إختياره لهذا الوضوع في النقاط‬

‫‪   -1‬أهمي==ة الموض==وع وعظم الفوائ==د العلمي==ة المترتب==ة على بحث==ه لتعلق==ه بمعظم المع==امالت المالي==ة‬
‫المنتشرة والمتغيرة‪ ‬في العصر الحاضر‪.‬‬
‫‪   -2‬أن هذا الموضوع‪ -‬حسب معرفتي‪ -‬لم يفرد بالبحث المفصل ألحكامه في رسالة علمية متخصصة‪.‬‬
‫‪   -3‬رغب==تي الملح==ة في التخص==ص في المع==امالت المالي==ة نظ==را لقل==ة المتخصص==ين فيه==ا في بل==دي‬
‫(باكستان) مع شدة الحاجة إليها‪.‬‬
‫‪    -4‬حاجة الموضوع إلى تحرير كثير من قضاياه المعاصرة ودراستها وبيان الحكم الشرعي فيها‪.‬‬
‫‪   -5‬حاجة كثير من أصحاب األموال إلى معرفة أحكام التعامل في اإليراد و اإلستيراد وبيان ما يح==ل‬
‫منها وما يحرم‪.‬‬
‫خطة البحث‪:‬‬

‫وخاتمة‪.‬‬ ‫يتكون البحث‪:‬مقدمة وخمسة فصول‬

‫المقدمة‪:‬وتشمل على ضابط الموض==وع وأهميت==ه وأهداف==ه وأس==باب اختي==اره والدراس==ات الس==ابقة‬
‫ومنهج البحث وخطته‪.‬‬

‫الفصل األول‪:‬بيان اإليراد و االستيراد‬

‫الفصل الثاني‪:‬اإلعتماد المستندي في المصارف التقليدية‪ ،‬ضرورته‪،‬المتعاقدين‪،‬أقسامه ـ‬
‫الفصل الثالث‪:‬اإلعتماد المستندي في المصارف اإلسالمية‪،‬‬
‫الفص‪ZZZ‬ل الرابع‪:‬الق===وانين الدولي===ة لإلي===راد و اإلس===تيراد‪ ،‬القبض و الملكي===ة و خي===ار العيب و‬
‫خيارالرؤية و قوانين التحكيم‬
‫الفصل الخامس‪:‬أحكام الشرعية لضرورات= القانون في اإليراد و اإلس==تيراد‪ ،‬الت==أمين‪ ،‬الته==ريب‪،‬‬
‫وغير ذالك‬
‫وتشمل‪:‬‬ ‫الخاتمة‬
‫أهم نتائج البحث‬
‫وتشمل‪:‬‬ ‫الفهارس‬
‫‪-1‬فهرس اآليات القرآنية‬
‫‪-2‬فهرس األحاديث واآلثار‬
‫‪-3‬فهرس األعالم‬
‫‪-4‬فهرس المصادر والمراجع‬
‫‪-5‬فهرس الموضوعات‬
‫هذا‪،‬ونسأل هللا سبحانه وتعالى أن ينفع بهذا البحث‪ ،‬كما نسأله سبحانه وتعالى للب==احث مزي==دا من‬
‫التوفيق ‪.‬‬