AHMAD KAMAL BIN ROSLAN 2009658166 SHAZANAH BT SARWAR KHAN 2009826226

QUESTION 12

Describe the following features which have been prohibited in Islam: a. Riba b. Maysir

RIBA

 

DEFINITION :Literally - increase, addition, and augmentation Technically: 1) increase in trade transactions

2) increase in loan transactions
 

Abu Bakar Jassas ;

“It is a loan given with stipulated increase on the principle payable by the loance”

Muhammad Ala Thanwi

“An increase without any corresponding consideration which has been stipulated in favour of one of the two parties in a contract of exchange”

Rum: 39 Surah al-Nisa: 161 Surah ali-Imran : 130 Riba was prohibited for jews however.w.PROHIBITION OF RIBA IN AlQURAN 4 stages Surah al.t) Prohibited the charging of double and multiple riba Compare riba with Zakat& charityPraised zakat& charity but not riba Surah alBaqarah 275-281 Conclusively prohibited all forms of riba .they continued to practice riba & Incurred the wrath of Allah (s.

Instead. he should not accept it. he traded two volumes of lower quality dates for one volume of higher quality dates. the one who records it and the witnesses to the transaction and said: they are all alike [in guilt] From Anas ibn Malik (Gbpwh). “This is precisely the forbidden riba! Do not do this. and use the proceeds to buy the others” . “ The prophet said: when one of you grants a loan and the borrower offers him a dish. the Prophet (Pbuh) said. “ the prophet (pbuh) cursed the receiver and the payer of interest .PROHIBITION OF RIBA IN HADITH From Jabir (Gbpwh). Bilal explained that. The Prophet (Pbuh) inquired about their source. he should not ride. sell the first type of dates.and if the borrower offers a ride on an animal. unless the two of them have been previously accustomed to exchanging such favours mutually Bilal (Gbpwh) once visited the Messenger of Allah (Pbuh) with some high qualities dates. Due to this.

. in fiqh terminology. riba means an increase in one of two homogeneous equivalents being exchanged without this increase being accompanied by a return. and in the al-Baqarah: 275. riba literally means increase. it stands for every increase not justified by the return. Muhammad ibn Abdullah ibn al-Arabi who is a Qur'an commentator and Maliki jurist states that.MUSLIM JURISTS OR SCHOLARS VIEWS ON RIBA   Abd al-Rahman al-Jaziri in his book „al-Fiqh 'ala al-Madhahib al-Arba'ah‟ stated that.

CLASSIFICATIONS OF RIBA Types of Riba Riba alBuyu’(riba in trade transaction Riba alDuyun (riba in loan transaction) Riba alQardh Riba alJahilliyah Riba alNasiah Riba alFadl .

Eg: if 5 kg of gold is exchanged with another 5 kg of gold. the said trade transaction will amount to riba al nasiah since there is an existence of delay in the said transaction Riba al-Fadl ( riba by way of access) -arises when there is any additional quantity or in equality in the exchange of goods -Eg: an exchange of 5 kg of wheat with 6 kg of wheat amounts to riba al-fadl .Buyu’ (riba in trade transaction):Riba al-Nasiah (riba of delay) -charged based on deferment of completion of an exchange .CLASSIFICATIONS OF RIBA (cont)   Riba al. with a delay of one year.

This form of riba could be viewed in loan contracts. for the owner of debt stated in the contract. which the debtor needs to fulfill.Jahilliyah:a form of interest. This form of riba could be viewed in credit card transactions where. Riba al.Duyun(riba in loan transaction): Riba al-Qardh :any predetermined benefit. the delay of repayment of the debt by the debtor will result the debtor to pay an additional or surplus amount to the creditor  .CLASSIFICATIONS OF RIBA (cont) Riba al. which is charged above the original debt as a penalty to the debtor due to his inability to service the loan repayment within the time agreed.

exploitations and manipulations among the parties involved in a trade or loan transaction. one shall generally analyse the advantages of performing an interest-free transaction in Islamic banks as compared to an interest-based transaction in the conventional banks . In order to appreciate the rationale underlying the prohibition of riba in Islamic transactions.RATIONALE ON THE PROHIBITION OF RIBA   The paramount reason or rationale behind the prohibition of riba are to prevent any forms of injustice.

In the circumstances where the Islamic banks are suffering losses. the income agreed is only a very small portion as compared to the total amount of profit gained by the banks .RATIONALE ON THE PROHIBITION OF RIBA (cont) Islamic banks will reward the depositors only in the event where the banks are gaining profits. the banks will not be compelled to pay any amount of profit to their depositees the clients of an Islamic bank will receive a fair share of profit based on the proportion agreed Conventional banks would be obliged to pay to the depositors more then the principal amount deposited regardless whether the financial institution is having financial difficulties or suffers loss clients of a conventional bank are guaranteed to receive a fixed income from the bank.

murabahah (mark up sale). various innovative instruments based on the contract of exchange have been developed. Eg: BBA (deferred payment sale).ijarah thumma al-bay (islamic hire purchase) and bay-al dyn (sale of debt) Conventional banks Accumulate profits through interest.based transactions .ijarah (leasing).RATIONALE ON THE PROHIBITION OF RIBA (cont) Islamic banks have resorted contract of exchange as the best accommodative mode of mobilising funds under an Islamic finance framework. Due to this.

.g: Letter of Guarantee based on kafalah. fees for money transfer and the like.RATIONALE ON THE PROHIBITION OF RIBA (cont) Islamic banks - Conventional banks has explored the contract of -Accumulate profits through security to mobilise the funds and interest.based transactions present product available based on hiwalah (transfer of debt). -have also maintained the contract of services -E.

or without undertaking any liability against it. or without working for it.MAYSIR  Definition:  Maysir derives from the word “Yusrun” which denotes wishing something valuable with ease and without paying any equivalent compensation for it. . or by way of a game of chance.

MAYSIR  Definition:  Professor Mohammad Hashim Kamali:   Maysir is a purchase and sale of an asset in the expectation of a gain from the changes in the price of the asset. speculation and gambling. it is difficult to provide a comprehensive definition since there are distinguishing lines between investment. However. .

If his right continues to be unfulfilled. Gharar thus occurs in a contract when one of the parties takes what is due to him but the other does not receive his entitlement. and a gharar sale of this kind engages in gambling and punting (al-qimar wa‟l maysir) . the first becomes guilty of the wrongful devouring of the property of his counterpart in the transaction.MAYSIR  Definition:  Ibn Taymiyyah:     gharar is one of the branches of gambling. whether or not the transaction involves gambling and unlawful devouring of the property of others (akl mal al ghayr bi‟l batil).

or unless he or she gives it away freely to charity. which includes raffling or a lottery makes a person dependent on chance. . In Islam.MAYSIR  Why Maysir is prohibited?  Dr. taking the property of a person as gambling losses is unlawful. thus. luck and empty wishes. an individual‟s property is sacred and it may not be taken away from the owner except through lawful exchange. Mohd Ma‟sum Billah:    Gambling. making that person less inclined to work seriously and productively. Accordingly.

" Thus doth Allah make Clear to you His Signs: In order that ye may consider (al-Baqarah:219) . for men." They ask Thee How much They are to spend. say: "In them is great sin.MAYSIR  Prohibition of Maysir in Al-Quran:  They ask Thee concerning wine and gambling. and some profit. but the sin is greater than the profit. say: "What is beyond your needs.

and from prayer: will ye not then abstain? (al-Maidah: 90-91) . and hinder you from the remembrance of Allah. (dedication of) stones. and (divination by) arrows.. with Intoxicants and gambling. Satan's plan is (but) to excite enmity and hatred between you.of Satan's handwork: eschew such (abomination). are an abomination.MAYSIR  Prohibition of Maysir in Al-Quran:  O ye who believe! Intoxicants and gambling. that ye may prosper.

the flesh of swine.MAYSIR  Prohibition of Maysir in Al-Quran:  Forbidden to you (for food) are: dead meat. and that on which hath been invoked the name of other than Allah…. blood. (forbidden) also is the division (of meat) by raffling with arrows: that is impiety. (al-Maidah: 3) .

The form of gambling most popular to Arabs was gambling by casting lots by means of arrows. . Allah's Messenger (pbuh) forbade a transaction determined by throwing stones. on the principle of lottery. One received a large or small share depending on the mark on the arrow drawn. and the type which involves some uncertainty. for division of carcass of slaughtered animals. The carcass was divided into unequal parts and marked arrows were drawn from a bag.MAYSIR  According to a tradition reported by Abu Huraira. Obviously it was a pure game of chance.

a life insurance contract involves unlawful elements.MAYSIR  Why conventional Life Insurance is prohibited?  First. which can never be binding as the Prophet (saw) says to this effect: “… the Muslims are bound by the conditions except the condition which prohibits the permitted one or the one which permits the prohibited one.” (al-Tarmizi) .

. Hoping for such a chance is similar to gambling and thus. the gambler always hopes for a chance to make a gain. it contains an element of betting.MAYSIR  Why conventional Life Insurance is prohibited?  Second. in a life insurance policy. Similarly. the assured upon the payment of premiums to the insurer. always hopes for a chance to gain a large amount of money. Shari‟ah never recognises life insurance as a valid transaction.    When betting.

it contains the element of maysir (gambling).MAYSIR  Why conventional Life Insurance is prohibited?  Third. in a life insurance policy the assured hopes for a chance to make a gain.   When gambling. . a gambler pays a certain amount of money in the hope that he will gain an additional large amount of money. This is the same as gambling which is prohibited by the Shari‟ah. Similarly.

because they contain elements of both kinds of riba. .MAYSIR  Why conventional Life Insurance is prohibited?  Fourth. it becomes riba al-Fadhl.e. For example. if the insurer pays the insured or his beneficiary more than what the insured had paid by way of paid-premium. i.    Many Ulama oppose life insurance practices. the payments made by the insurer to the assured after a particular period of time become riba al-Nasiah. it contains the element of Riba. riba al-fadhl and riba al-Nasiah.

.MAYSIR  Why conventional Life Insurance is prohibited?  Fifth. the subject matter of the contract is the death of the assured and it is not certain whether the assured‟s death will occur during the policy period or not. it has an element of al-Gharar (uncertainty).  The contract is deemed to be null and void ab initio. This uncertainty in the policy leads it to be invalid.   In a life insurance contract.

even though he does not own the shares. that person will purchase the stocks and close its position. when the price of the shares do fall. Later.MAYSIR  Speculation in the Stock Market:  Short Selling?    Short selling of stocks is not permissible because it is seen to be speculative in nature. that person will borrow from and instruct his remisier to sell the shares in that company. when a person foresees that a share price will fall. Under this practice. .

MAYSIR  Speculation in the Stock Market:  Short Selling?  This practice is clearly prohibited under the Shari‟ah principles because it involves the selling of something which the seller does not as yet own. .

The Mejella defines a void contract as “a contract which is not good in its foundation”. does not become obligatory and does not transfer any property. it does not confer a right.” . According to Dr.MAYSIR  The Effect of the Contract Entered Into:    A void contract is an agreement which is merely null and incapable of conformation. Hussain Hamid Hassan: “A void contract has no existence in the eyes of the law.

(4) A contract which foundation or substance is unlawful or illegal. . and etc. (2) A contract which object is unlawful.MAYSIR  The Effect of the Contract Entered Into:  Among the circumstances whereby a contract is said to be void or bathil:      (1) A contract which involves immorality. (3) A contract which involves illegality against public policy. (5) Any other contract or agreement which directly or indirectly contrary to the divine sanctions which would render it void ab initio.

It is crucial to note that. The opinions delivered by the Muslims jurists have also further clarified the prohibitions on riba and maysir.CONCLUSION    The practice of riba and maysir is strictly prohibited under the Shariah law as provided by the Al-Quran and hadith. . the practice of riba and maysir are illegitimate in any Islamic form of transactions.

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