Prophet Muhammad S.A.W.

W said that the time will come when one does not care how they gain
money, whether legally or illegally=====) so it’s a warning for us and we should not be lazy in this
matter

What Islam Thinks about the Economy? and

what should be the role of Entrepreneurs in it?
Everyday we are involved in the transactions whether its paying, buying, signing contracts, employing
people, organizing any kind of work and activity or arrangement whether its partnership,,,,,,,,,so we
need to know that what is permissible and what it is not permissible

Money is like a blood essentially required in a body,,,,, e.g. right now the conditions of companies
worth in the world and then their ultimate control

Hazrat Umar R.A. used to hire special auditors in the market of Madinah to know that how trade
activities are being done.

Hazrat Abu Huraira Narrated that “my immigrant brothers are busy trading in markets and my Ansaar
brothers are busy with their properties”

Islam emphasized a lot to do the businesses, as the companions were so keen and showed eager to
learn business rules from Prophet S.A.W.W and then used to apply in the markets of Madinah. Hazrat
Umar R.A used to SWAP their duties with his Partner,,, learn, one day, business from Prophet
(S.A.W.W) and the other day he R.A used to do the business in the markets, and every night both
partners meet together.

Islam wants us to be on upper hand:

The model of Islam was to lead and to do businesses and to become financially strong and ultimately
to become to the giving hand rather than the receiving hand.

In another Narration, Imam Bukhari told that Abdul Rehman Ibn Auf, after migrating to Madina, he
was offered wealth and properties to rebuild his life but he refused and said that tell me where the
markets are so that I can trade and earn.

Prophet S.A.W.W. told us that the upper hand is a better hand, and the people who beg and do
nothing will appear on the day of judgement without skin on their face, which means that with no
honor and dignity.
The best of people are those who benefit other people

=) Establishing Economic System =) establishment of Markets immediately after the Migration

The Prophet S.A.W.W and his companions migrated to Madinah because in Makkah different
economic sanctions and restrictions were imposed on them, as they could not trade and do any
economic activity so after migrating to Madinah, Prophet S.A.W.W immediately after establishing the
mosque, He S.A.W.W established the Markets and set all rule and regulations of trade.

Entrepreneurial Activities are the Bloodline to this economic system

=) Heart of the Islamic Economic System

The more money you have, the more you can engage in the different sectors of the economy. vice
versa

One of the Aims of Shariah is the protection of economic system that’s why we have so many rules
and these rules come under Muaamalaat, in Muaamlaat every thing is permissible unless it is against
objectives of Shariah or there is specific instruction about that matter.

More specifically, The Islam puts more responsibility on the people who have more wealth as Islam
wants that the wealth should keep circulating in all segments of the society e.g. Zakat is the system
which is meant to support the bottom of the society

Distributive Justice=) Micheal Sandal

Zakat is very Specific, its surgical.

General Sadaqah is more Broader

the Awqaf or Endowment Funds =) to fill the Big Holes in the Society

is a specific mode created by the wealthy people if they find the big holes in the society which can not
be fulfilled by general Sadaqah, these funds are great in a sense that they create growth opportunities
for the deprived people and also establish the big institutions like hospitals, universities, and so on,
for the betterment of the society.

In turkey, 20,000 Awqaf properties, 80,000 employees,, and some projects in Turkey deal with street
cats and dogs,,,, e.g. some Apartment Building Waqf, consequently its rental income can be used as a
finance of any welfare project,,,, Akhuwat Foundation a small example in Pakistan

CSR should be linked with the Endowment Funds

Islam also breaks the wealth, through the law of Inheritance,,,,,, and Islam’s preference to marry out
of family,,,,,,

Through the distribution of wealth, the entire economic circle goes up

Islam’s core emphasis is to make the money more circulating in entire economy.

Then it can be a very important question that then why Islam puts Prohibitions?

Actually Islam puts the boarder to all activities so that the real economic activities should be separate
from the activities related to exploitation or gambling or interest based activities, as all these don’t
have the direct link with the economy and in-fact these damage the economy.

Companions asked Prophet S.A.W.W, that what is the best way to earn money, he S.A.W.W told that
the best way to make something from your own hand and then sell it trough a legitimate way,,,, so it
needs to be something VALUABLE, TANGIBLE

so Islam wants that we should have something that’s valuable, tangible, whether its agriculture,
manufacturing, genuine tangible service, and so you make money by producing something that is real
and then you sell it and islam wants to put the boarder around these things to capture everything real
economic activities from fictional things like exploitations, gambling and so on and Don’t focus on
these fake transactions, fake economy, and focus on real things which benefits the society the most.

And the Heart of this economic System is The Entrepreneurship, as the Islam says that Riba is
prohibited and Trade is allowed. So the Islamic Finance comes with a Business Mindset
What are the aims of Shariah? One of the narrations from Prophet S.A.W.W told us about the story of
Boat, and told that there are two groups of people, the people on the upper Deck and the people at
the lower Deck.

The upper level people are good people and lower level people are trouble makers. The upper people
have access to the capital and the resources while the down people don’t have access, so again and
again they go up and ask the upper deck people to give us the water and so on. Lets say in the bottom
there is banker as well who tells that I know how to access the water. As we are in the boat and there
is water all around the boat so, in order to maximize the ROA, ROE, the efficient way to get water is to
drill the hole in the bottom corner of the boat. So Prophet S.A.W.W said that if the top deck people
don’t prevent the bottom deck people to drill hole, then every body will sink ultimately and the whole
boat or the economic system will collapse.

Now lets assume if bad people are on the top and controlling the boat while the good people
(muslims) are on the bottom, no control on resources, and the bad people are still drilling the
holes,,,,,,, so does the Islam wants the Muslims to be in the position of powerless, having no access to
resources

Islam wants the people to be upper hand and should prevent the bad people to demage the society.
In-fact they should all support the lower end people to come to upper level and get the access of
basics of life like air and water and live with them, so that poor people don’t feel need to drill or
damage the society ,,,,,,,,,===) that’s one of the most important Maqad e Shariah

Islamic Law of Contract

What is contract? Aqd or Uqood =) something that is tied or bound together. =)
a legally binding agreement, legal relationship that creates an obligation with
regards to the subject matter. So it ties in what is being transacted and the
people who are engaging in a legal sense.
4 common elements in the contract =)
1) parties two or more (having authority to buy or sell) ,
2) basic offer and acceptance (commonly acceptable gesture)
3) subject matter (have economic and shariah value, capable of ownership,
capable of delivery/possession, specified and quantified, Prophet S.A.W.W said
that “He who buys foodstuff should not sell it until he has taken possession of
it” its about the possession e.g. to get money and commit a certain amount of
fish from ocean or birds through hunting, such things are not permissible, it
applies in anywhere where there is difficulty in delivery of the subject matter
with certainty or with question mark)
4) The meeting (the Prophet S.A.W.W. said that the buyer and seller have right
to accept or cancel until they separate, the contract is binding after the session
is finalized)

Once the Bilal R.A brought low quantity of good quality dates in exchange of
high amount of low quality dates, but the Prophet S.A.W.W discourage him to
do so and said its Riba. Prophet S.A.W.W said that it would be better if you sell
the low quality dates in the market and then from that money you should buy
the high quality dates, it would be more fair and transparent deal. So the
transactions should not be the linked with other transactions.

People would be engaging in such type of transactions for two basic reasons:
1) Commercial reason,,,, Sale and Lease
2) Benovelent or Charitable,,, Or giving a loan =) they can not make profit

Sale
Type of transaction where we are transferring the subject matter permanently,,,,
ownership immediately transfers
There are Two Types of Sale =) 1 is Immediate or Spot Transaction ,,,,,,,, 2nd is delayed,
payment is done in installment, deferred payment in 1year or so.

Lease =) Usufruct
In lease the subject matter is not the Asset itself rather it’s the Right to Use that asset.
In lease there is time limit, Not the Permanent
Anything which does not have usufruct, Can not be leased. Like Food can not be
leased, because to get benefit the food has to be consumed, you have to eat it. You
Can not Lease Petrol, Money and so on.

Loan =) its Charity, Qard e Hassan,,,, Temporary type of transfer,,,, Its Free of Charge,
No extra amount can be demanded,,,,,,,,,,,, Same for Same

Different Type of Ownership

Sale is the exchange of Assets
Ownership of Asset
Ownership of Debt

If I am owner of debt after selling the car then I will not be responsible for any demge
in car, but in case of lease I will be held responsible for any damage.
Full Ownership =) means Ownership of Asset and Ownership of Usufruct
Valid Vs Invalid Contract
Valid Contract =) All elements of contracts are found in order
Void (Batil) =) contract does not fullfil the essential conditions like illegal subject
matter, offer and acceptance, ownership, etc. )
Voidable/defective (Fasid) =) it has all elements of a contract except nonessential
attributes of the contract (e.g. minute specification of subject matter needs to be
removed or changed to make the contract valid).

Conditions in a Contract =) conditions in a contract must be honored as long as they do

not breach the Shariah principles.
“Both the buyer and the Seller retain the option as long as they have not separated or
they give each other the option” [Bukhari and Muslim]

Case Study

Trade Vs Interest
If someone sales the asset (e.g. house) then the increase over time is permissible like:
$9 House =====) $10 in one year (Sale of Asset) (Permissible)
Subject Matter is House
But if we give a Loan/Debt of $9 ======) $10 in one year (Sale of Debt) (Increase is Riba)

Subject Matter is Money

“those who consume interest can not stand (on the day of Resurrection) except as one
stands who is being beaten by Satan into Insanity. This is because they say “trade is
(just) like interest. But Allah has permitted trade and forbidden interest. (Quran, Al
Baqarah: 275)

In loan =) it is non-profit or charitable activity =) its Riba if you earn profit from giving
cash loan to someone.

Rest you can earn money in blue circle of business/trade. And beyond boarder there
are non-permissible activities which are not allowed.
 In Islam Ownership risk is most important,,,, If you don’t have ownership risk
then it means that you are not Owner of any asset,,,,,,,, So Ownership risk is mot
important.
 Islamic Bank can not lend money,,,,,,,,, Islamic Bank Home Loan can not be a
term,,,,,,,,,, Loan for profit in Islam is Haram,,,,,,,,,,,,, So we use the term of Financing

Islamic Finance does engage in real things and real economic activities