Fiqh of Money & Transactions (Pure Paisa)

Qabeelat Haadi Pure Paisa Professional Notes

الرحيم الرحمن للا بسم

Part One: Transaction of Wealth

Money is rizq or sustenance which comes from Allaah تعالى و سبحانه . Your salary, the gift you got on Eid, brother fixing your car for free, these are all examples of rizq. A person will not die until he or she has received all the rizq written for him. Sheikh Yaser narrated us a story about a Bedouin who was seen by the Prophet (S) pulling water from a well. The Bedouin would tie rope to his camel and kneel on wooden platform as he pulls water bucket. As he knelt on the platform, the wooden platform broke and he fell inside the well. People around him rushed to save him. He was pulled out to safety. He sat for a little while, drank some milk and went again to pull water, this time he fell and died. The Bedouin survived first time, because he had some rizq left in this world. Allaah made some people rich and others poor. Is the poor patient person better than the rich thankful one? The more righteous of them is best. It is extremely important to earn halal money. A man asked: Oh rasulullah وسلم عليه للا صلى , make duaa so my duaas are accepted. He وسلم عليه للا صلى replied “Make your provisions halal and your duaa will be accepted.” Abdullah ibn Masood narrated: “Imagine a man who is on the road, disheveled, dusty; he raises his hands to the heavens, he says “Ya Rab, my Ya Rab. And his food, his clothes, his nutrition all are haram, so how can his duaa be accepted?” although he is in most need and most deserving for duaa to be accepted. GEM: Some professions are haram in Islam, e.g. working in bank or financial institutions, insurance company, etc Five steps for increasing you wealth

1. Righteousness ○ And whoever fears Allaah, Allaah will take them out of difficulty and

provide for them from sources they don’t expect. ○ A man came to sheikh, he was hoping for promotion, Sheikh told him to

make duaa. He made duaa and after sometime he got fired, he was very worried. Sheikh told him to have trust in Allaah, the man was patient and Allaah rewarded him with better job. If he had stayed at previous company he would never had this better opportunity

2. Istighfaar


○ Rasul Allaah وسلم عليه للا صلى used to make istighfaar more than 70 times a day! Nuh سلم علي told his people seek forgiveness” and Allaah تعالى و سبحانه will send rain to you in abundance and in wealth and children

3. Being thankful

○ Allaah say if you are grateful, I will increase my blessings upon you

4. Generosity ○ If you give, Allaah will multiply and bring it back to you. ○ Sheikh gave an example of a little girl, who gave $200, this is all she had.

Latter in the evening, she won a halal Plasma TV worth $500!

5. Tawakkul ○ Put your trust in Allaah, after you do your part. ○ If you truly trust Allaah, He will provide for you, like he provides for the

birds. They go out with an empty stomach in the morning and return full stomach in the evening. Birds don’t have retirement plan, saving account, or refrigerator full of food.

Chapter 1 - Your Real Financial World

Loans (contract of charity)

In Islam, loans are contract of charity. Loan is given to help someone is difficult situation and not to take advantage of the them. Some of the loan present in the society

Student loans

● Subsidized ○ In this loan, government picks up interest payment as long as student is

registered in qualified school

● Unsubsidized ○ Interest starts to accrue while students are still in the school. This means

that students will have huge loan balance when they graduate Home loans

● Conventional Mortgage ○ Bank give money to buy real estate property. Whole amount is to be

returned with interest in specified period of time. Until whole amount is paid, there is lien on the property. These loan are usually 15 to 30 years

● Rent to own


○ Monthly rent is paid for piece of property with the option of eventually owning it. This arrangement is made before rental is starts. Portion of rental payments are applied towards property purchase

Electronic cards

● Credit cards ○ This electronic card is issued by financial institutions. Customer borrows

money at the point of sale. Interest is added to the payment one month after the purchase of the item. Cards have preset spending limit and is designed for short term financing

● Charge card ○ This is similar to credit card, but customer is required to pay full balance

on receipt of statement. Other difference is that customer is given much higher limit that credit card

● Debit cards ○ This card allow person to withdraw his own money at the the point of sale

Investment and banking (Contracts of Investments)

● Retirement plan ○ A 401(k) plan is a type of retirement savings plan that some private

employers sponsor to help their employees save for retirement. As an employee, you can choose to have a portion of your paycheck paid directly into your individual retirement account. Sometime employer also match employee contribution.

● Stock Market ○ A stock market or equity market is a public entity for the trading of

company stock (shares) and at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. It is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company’s future performance.

● Savings account ○ A form of bank account. Money earns guaranteed interest, but money

cannot be withdrawn using checks


● Partnerships ○ When two of more people join together to run a business. All of the

partners are personally responsible for debt from business according to their share in the company and they share in the profit based on their share as well. This is recommended acts of investment in Islamic financing. This keeps money following in the economy and people employed.

GEM Just as what you expect when you go to a shop, you need to have quality service. Don’t blame the Muslims for not supporting your business if you are not competitive

Sale and Trade (Contracts of Exchange)

● Exchange of goods, services or property for money, examples are ● Online sales ● On site auctions ● Money exchange ● Vending machines ● Check cashing ● In Islamic financial system, we are not allowed to sell items which does not

exist unless it is custom made and we are not allowed to make money on money

Games and Chances (Contracts of Exchange)

● Lottery and scratch cards. These are example of gambling and haram ● Draw prizes ● Price line deals ● Raffle ticket ● SMS games ● Gaming. In a tournament, every team contribute amount of money and winning

teams takes it all

Insurance (Contracts of Security)

● Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Some of the forms of insurance contracts are

○ Health insurance ○ Car insurance ○ Life insurance


○ Home insurance ○ Warranties

Financial system and money creation

The financial system of our time is based on interest and uncertainty and deceit. Watch video titled Money as debt on http://www.youtube.com, to understand how money is created in capitalist system.

Sheikh Yasser Birjas referred to Summary of fiqh and business transactions by Sheikh Salah As Saawy. AMJA http://amjaonline.org/ also has various fatwas regarding business transactions.

A Muslim is responsible to learn the fiqh of transactions as much as he or she needs in their daily lives.

Chapter 2: The Financial Ethics of a Muslim Investor

Merchant rules and etiquette:

1. Have good intention 2. Good manners (kindness, generosity), The prophet وسلم عليه للا صلى said “May

Allaah have mercy on the person who is kind and gentle when he buys or sells something”

3. Know that poverty is not a virtue, but poor people do enter enter Jannah before rich do.

Hadith: “Oh Allaah I seek refuge in you from disbelief, and poverty, and the punishment of the grave” Hadith: Oh Allaah, help us to pay our debt and make us self-sufficient

4. Find halal products and services to sell 5. Have the knowledge of halal and haram in business 6. Observing the financial rights of others 7. Not consuming people’s wealth by falsehood 8. To avoid riba and all contracts that lead to it. 9. Following the laws of the land and regulations regarding business in the shade of

what Allaah permits 10. Not to transgress in dealings or cause harm to others. 11. Supporting one another to succeed in business.

GEM: Generally, government should not put caps on items unless they are necessary products for the society

http://amjaonline.org/







Chapter 3: Definition of Wealth

Wealth: (Maal), Anything to which people have an inclination and is permitted in the shari’ah and can be stored to use latter

Imam shifie says wealth is defined as “something that has intrinsic value, to which it is sold for, which can lose value even if only by little, which will not be discard without care by the people as is done to a worthless coin or something similar to that”

There are three right on the wealth

1. The right of the owner: ○ To take wealth away only with owner’s consent ○ It is protected under the law of theft

2. The right of Allaah: ○ Earn in a halal manner ○ Earn it responsibly ○ Pay zakah

3. The right of the community ○ Benefit to community is at higher status than benefit to individual

GEM: What if someone pays zakah and then claiming it on tax? That is rizq from Allaah, poor already got their share

Types of Wealth

● Nature of Wealth ○ Price or money (thaman ثمن )

■This is three types: ● Gold ● Silver ● And its replacement (e.g. paper currency)

● Item which is priced or valued (muthmin مثمن ) ○ Transferable or movable commodity (manqul منقول ), e.g. car, iPad,

etc ○ Non-transferable or non-movable commodity (‘aqār, عقار ), e.g.

house, factory, etc.


Owned and unowned wealth

Ownership can be acquired through one of three following steps

1. Picking up free property or commodity, e.g. capturing a deer or talking a free book

2. Valid contract that allow transfer of ownership e.g. buying a car or getting a gift of watch

3. Inheritance Unowned wealth

● Public properties that cannot be privately owned such as public roads, bridges, seas and sunlight, public / state parks ملكيةعامة mulkiyah ‘āmmah). Ibn Abbas reported that the Messenger of Allaah said: All Muslims are partners in three things: in water, herbage and fire. (Abu Daud, Ibn Majah)

● Public properties that can be privately owned under Shari’ah approval such as an endowment estate for the benefit of the poor or the Masajid.

● Private properties that can be owned and susceptible to transfer of ownership to others e.g. commodities that do not fit into the previous two types. ( ملكيةخاصة (mulkiyah khāṣṣah)

Specific and Unspecific Wealth

● Fungible (‘aynee or mithlee عيني أو مثلي ). A fungible item is one that specific and can be substituted by others of its kind. e.g. Dell laptop running Linux

● Non-fungible (dayn or qiyamee دين أو قيمي ) A non-fungible item is one that is not specific and cannot be substituted by another of its kind. A custom made Mini Cooper

Valued and non-Valued Wealth

The value of a commodity in terms of the permissibility to benefit from it is based on the permissibility of its use in Shari’ah and not by human preference.

● Valued (mal un mu’tabar) ○ Value is not necessarily a price tag, but a value that it put to it according

to shariah. e.g. cars, livestock, gold.

● Non-valued (mal ghayr mu’tabar) ○ Commodity that is not pure or has no value in reason of shariah. e.g. :wine,

stolen golds, statues, earning of prostitute, the price of a dog and the fees of the bloodletter." Hadith of Abu Mas'ud,

Durable and consumable wealth


● Durable مدخر (muddakhar) ○ Can be stored, e.g. rice, date, raisin, books

● Consumable غيرمدخر (ghayr muddakhar) ○ Cannot be stored for long time. e.g. mangos

Part Two: Contracts

Chapter 4: Definitions

1. Contracts divides your actions into ○ Mu’amalat مالتمعا (On scale of mufa’alah, from the root verb of ta’aamala,

i.e.) to cooperate or work with one another or do business with one another. These are non-devotional acts between you and the creation

○ ‘Ibadat عبادات deals with the relationship between man and the Creator and are devotional acts such as salah and fasting.

2. Permissibility of Mu’amalat and Contracts From the Quraan

يهاالذي ياأ د نآمنواأ وف وابا لعق و

“O you who believe, fulfill all your contractual obligations” (al-Ma’idah, 1)

ل اللله ا وأح ب يعوح با مالر ر

But Allaah has allowed trade and forbidden usury” (al-Baqarah, 275)

يهاالذي ياأ نآمنوال تأكل واأموالكم ب ي نكمبا لباط لل ن تكو نتج ن ةع ار تر م اض نكم

O you who believe, do not wrongfully consume each other’s wealth but trade by mutual consent” (al-Nisa’, 29)

From the Sunnah

“Verily, Allaah, the Most High, has prescribed the obligatory deeds, so do not neglect them. He had set the limits, so do not go beyond them. He has forbidden some things, do so not violate them. And He has been silent about some things, out of mercy upon you and not out of forgetfulness, so do not go looking for them.” (al-Daraqutni, hasan)


3. A Contract (‘aqd عقد ) Linguistically – ‘Aqd, (plural ‘uqud), literally means to tie or “to bind” and in the modern sense it refers to a contract – to confirm and strengthen an agreement. It is like strengthening the agreement like tying a knot.

Technical definition, a contract is an agreement entered into voluntarily by two or more parties with the intention of creating a legal obligation, which may have elements in writing or can be made orally.

The purposes of ‘aqd or a contract are as follows:

Type Purpose Examples 1. Contracts of

exchange Permanent exchange of ownership Sale of goods (bay’),

rental (‘Ijarah) 2. Contracts of

investment To make profit for the partners. This requires capital and labor and sharing or profit

Partnership - Musharakah Silent partnership- Mudarabah Share cropping Muzara’ah

3. Contracts of security (insurance in general)

To secure a pre-existing or defined liability in favor of a creditor, or to improve trust and confidence in a commercial relationship. This involves the creation of some kind of right over an asset that is in the ownership of the debtor, but no benefit is taken by the creditor unless maintenance is involved (e.g. if a creditor feeds a pawned goat, he may take the goat’s milk).

Mortgage (rahn), Guarantee (kafalah)

4. Contracts of charity

To give without counter value for the sake of Allah. It is a unilateral transfer of wealth with no conditions upon the recipient (in contrast to a reward where conditions exist, for example “I will give you a prize if you pass your

Gift (hiba), Donation (tabarru’), Loan (qard)


exams”). Gifts are not binding so long as the recipient does not suffer damage in event of the donor’s revocation.

5. Other forms of contract

To improve the ease and efficiency of commercial and other dealings. Don’t have the time to do something – hire someone to do it for you – agency. Trust contract if agree to keep something for someone – not responsible for damage if not negligent. Will be liability if damaged and you are responsible.

Agency (wakalah), Trust (amanah), Bill of exchange (hawalah)

Watch House of car at http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards

Chapter 5: Type of contracts

1. Ruling in Shariah

1. Obligatory ○ Marriage, if one has the means and fear falling into haram ○ Zakat

2. Recommended ○ Sadaqah ○ Loan

3. Permissible ○ Renting apartment ○ Sale and trade in general

4. Makruh (disliked)

http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards




















○ Selling grapes to someone who may make wine ○ Selling ammunition. The fuqha agreed that this creates more fitna

5. Haram (forbidden) ○ Riba contract ○ Gambling ○ Selling dead meat, pork or meat which is slathered in name other

than Allaah تعالى و سبحانه ○ Life insurance ○ Selling cigarettes

● Commodity Being Exchanged

1. Money from both parties (al sarf) , e.g. currency exchange

2. Money from one party and a movable commodity from other. This is the regular bay’a. e.g. selling a jilbab online, cash for a car, chocolate

3. Money from one party and a non-movable commodity from the other. e.g. buying a house or land

4. Money from one party and a benefit or work from the other. e.g. renting a car, carpeting cleaner, renting apartment, hiring someone to babysit

5. Non-money based contract from both parties, This is the strongest of all contracts because it cannot be revoked except in case permanence of contract is no longer possible, e.g. guarantee contract or truce, peace treaty, exchange of services, marriage, divorce contract, advertising for a website on my website

6. Money based commodity from a party and a non-money based commodity from the other. e.g. al-khul’ in a marriage contract, labor work, severance pay and separation agreement for layoff

Contracts in consideration of the binding or non-binding status after the contracts has already been established (Min Haythu al-Luzumu Wa ‘Adamih)


a. ‘Aqd lazim – or a binding contract on both parties. In this contract, no party has the right to revoke the contract without the consent of the other party. Example: renting an apartment for a 6-month contract, buying a car, partnerships, buying the wrong size for a jilbaab

b. ‘Aqd ghayr lazim – or a non-binding contract on both parties. In this case, any party has the right to withdraw from the contract after taking reasonable arrangement. Example: a partner decides to discontinue his partnership with other contracting parties or lending someone $500, gym or any membership, monthly rentals, software projects that are for limited period, laborer work hourly wages

c. ‘Aqd lazim – on one party and ‘Aqd ghayr lazim on the other. Examples: in pawn objects or a guarantee contract, gifts – it’s not laazim on recipient, but the giver cannot keep the gift for himself if the person does not accept the gift, unless the gift was marriage related-it is more than a gift in this case

Talking possession of the commodity (Min Haythu Ishtirat’l-Qabd wa’Adamih ( منحيثاشتراطالقبضوعدمه

● Contracts in which taking possession of the commodity is not obligatory at the time of the contrac

○ Examples: sale, buying objects other than gold or money online receiving after few days, marriage, guarantee

● Contracts in which taking possession of commodity obligatory at the time of contract.

○ Example gold and silver trading and currency exchange have to be in the same sitting and transfer from hand to hand – cannot do online trading

Contacts in consideration of the compensation r esulting from the exchange in contract (Min Haythu Wujud’I –‘Iwad wa’Adamih)

○ Al-Mu’awadah (compensatory): A compensatory contract in which each of the contracting parties receives a compensation as a result of the exchange of commodities in the contract ■Ex: sales and trade, rent and lease, sarf.

○ Al-Tabarru’ or Ghayr al-Mu’awadah (non-compensatory) A non-compensatory contract in which one of the contracting parties receives a valued commodity as a result of the exchange in the contract. ■Example: gifts, bequests, and fiduciary deposits (trust taking care of

someones money)


GEM: If you give loan to someone, you can ask for duaa. Because duaa is non-compensatory and this will not be riba

GEM If browner of money gives you gift, e.g. a chocolate or extra $1,000 This is OK and not riba, since you did not ask for it.

Contracts in consideration of their validity or invalidity in reason of the Shari’ah (Min Haythu ‘I-Sahhah wa’l-Fasad)

○ Valid contracts: ‘(عقدصحيح aqd ṣaḥīḥ ■A valid contract fulfills all the legal requirements and conditions in

essence and description of the contract, becoming binding and immediately effective.

■e.g. buying a new car cash money

○ Invalid contract: ‘( دأوباطلعقدفاس aqd fāsid aw bāṭil ■An invalid contract does not fulfill all the legal requirements or

conditions in essence or in description of the contract. It is not recognized by the Shari’ah, and it is not binding or effective until it is rectified

■e.g. buying a house from a minor, taking riba based loan, buying a stolen item

Chapter 6: The Pillars of Contract

There are three pillars of a contract

1. The commodity upon which the contract is being done (al-ma’qud ‘alayh)

2. The two (or more) contracting parties (al-Muta’aqidayn) / al’aaqidaan

3. The spoken word of the exchange

Conditions regarding trading parties

● Mutual consent from both parties, al-taradi. Quraan prohibits eating each other’s wealth unjustly

● To have trading competence based on (ahliyyat ‘I-tasarruf), which is the acquisition of rights that qualifies them to have the capacity to contract and to dispose financial affairs without the need of legal guardianship


○ Tasarruf - is acquisition of the legal capacity and qualifications to enter into a contract, take possession, and to dispose financial affairs without the need of legal guardianship

○ Ahliyya / aptitude is a quality which makes a person qualified for acquiring rights and undertaking duties and responsibilities

● Trading competence is identified by two qualities: ○ A. Puberty - maximum age to reach puberty is 15 years. Any child who

does not show any physical sign of puberty is declared so at age 15 in the lunar calendar.

○ Maturity – referring to financial maturity. Allaah تعالى و سبحانه orders us in Surah Nisa ayah 6 to test them and hand over their wealth if they have reached this mental state

The acquisition of rights to have the capacity to contract and trade is based on the acquisition of following items

● Al-dhimmah – the eligibility to bear liability / reliability. e.g. – a 10 year old child goes to buy goodyear tires / rims, would you sell it to him? No, because he is not capable to bear the responsibility and are not reliable. But for a 18 year old, you can sell since he can be held liable.

● Al-‘aql or reason – qualifies the individual to understand verbal communication. They have to understand the magnitude of the contract. e.g. buying a house, the buyer has to understand the consequences and responsibility he will bear with this contract

● Al-taklif or accountability – it is identified by reaching the age of puberty and developing a sound mind. Accountability qualifies the individual to assume responsibility.

● Al-wilayah – the authority to have over oneself or over the property in possession. e.g. a 25 year old can enter into a marriage contract without the consent of his parents (legally not emotionally). A 25 year woman can buy a car from her own money without asking anyone

Exceptions – from the rule of trading competence

● A child who has reached the faculty of discernment (al-sabiy al-mumayyiz) they can recognize the currencies, can exchange money, e.g. a kid can sell lemonade outside their houses (but not the house behind him), or 11 year boy scouts selling cookies.

● Women, in two cases. According to the majority of the fuqaha, a woman cannot have her nikah done without her wali’s approval. (Except for imam Abu Hanifah, who allowed woman to marry without wali’s consnet). The limitation for giving donation to one-third of her wealth without the need for her husband’s permission. That’s according to Imam Malik (rahimahullah) predominant in North Africa. The majority of fuqaha do not set any limit on her

The spoken word of the exchange (al-ṣīghah) الصيغة


1. Articles of the spoken word a. ’Ījāb or offer b. Qabūl or acceptance

2. Conditions: To be exchanged during the same contract session (majlis’l-‘aqd). i.e. the contract session should be whole. There should be no interruption between the offer and acceptance, and time should not lapse long (or expire) between filling out a contract and signing it.

The acceptance of the trade should be in respect to the actual offer. e.g. if the offer was for a red car, you cant give acceptance for the blue car without the consent of the seller.

CAUSES OF DEFECTIVE LEGAL CAPACITY – AWARID AL AHLIYYAH

Causes of Defective legal capacity - Awarid al Ahliyyah

1. The jurists divide the causes of defective capacity into two kinds: ○ Natural causes ( samawiyyah)/ Pre-decreed reasons ○ Acquired causes ( muktasabah)

These causes can be either temporary or permanent.

○ Natural Causes Of Defective Capacity ■These are causes that are beyond the control of the person (mukallaf)

and result from an act of the Creator. The jurists list ten causes: 1. Sighar (minor) 2. Junun (insanity) 3. ‘Atah ( idiocy); 4. Nisyan (forgetfulness); 5. Nawm (sleep); 6. Ighma (unconsciousness, fainting, epilepsy); 7. Riqq (lavery); 8. Marad (illness) - mentally challenged (advanced alzheimers),

and coma, post traumatic, mental disorder. 9. Mawt (death); 10. Haidh (menstruation), nifas (post natal bleeding) – these will

affect their capacity to worship, and not financial transactions or other worldly affairs

○ Acquired Causes Of Defective Capacity


■These are those that are created by man or by human choice. Jurists have listed seven causes:

1. Ignorance ( jahl) 2. Intoxication (sukr); 3. Jest (hazl); 4. Indiscretion / immaturity (safah) this concerns financial

transaction resulting in foolish waste and squandering of property. Such a person is subjected to interdiction (hajr) till such time that he mends his ways. This is based upon the necessity of preserving his wealth which is one of the acknowledged purpose of the law.

5. Journey (safar); 6. Mistake (khata, shubhah) 7. Coercion (ikrah), this can be obstacle to making a valid

binding contact e.g. bankruptcy

The Commodity – al-ma’qud ‘alayh

1. The commodity must be permissible to use in other than times of need (so alcohol and dead meat is not allowed)

2. The commodity must be sold by the owner or one who represents him. Examples of representatives: agent like a travel agent, father of a minor or anyone who is given the power of attorney, worker for a store.

3. Ownership of the commodity can be transferred to the buyer. This is an important Islamic principle. In the conventional market system, one of the major reasons for financial crisis globally is the speculative trading of products or items that are not in the ownership of the seller

4. The commodity must be identifiable whether actually, if it was specific, or by description if it was unspecific. e.g. of a specific commodity: an actual land, book, hijab. Examples of an unspecific commodity: buying from a catalogue, buying a duplicate of a model.

CHAPTER 7

Adding condition to a contract

General ruling, it is permissible to add conditions to a contract

From Qur’an, Allaah تعالى و سبحانه says in al-Ma’idah, “Oh you who believe! Honor your contracts.” From sunnah of Prophet Muhammad وسلم عليه للا صلى “The Muslims are upon their conditions, except a condition that makes prohibited permissible or a permissible prohibited.” (Abu Dawud)`


Types of conditions in the contract

Valid conditions

1. 1. Conditions that are part of the essence of the contract. e.g. to stipulate the transfer of ownership

2. Conditions that are for the benefit of the contract. e.g. to stipulate the price be paid in US dollars

3. Conditions that stipulate a particular benefit for either the buyer or seller and does not run contrary to the essence of the contract nor to its benefit. e.g. the seller of the house stipulates to live in it for the next month.

4. Stipulating penal conditions in order to ensure fulfillment of the contract. e.g. if you cancel a banquet hall booking within less than 30 days from the event date, you are obligated to pay 30% of the total booking fee.

Invalid conditions

1. To stipulate a second contract in exchange for the first one. Can’t have two contracts in 1 contract. e.g. I sell you my car if you sell your laptop to me

2. To stipulate conditions that go against the essence of the contract. e.g. I sell you my house if you agree not to change the original paint. or I sell you my house when my son graduate. When the condition that you put in has nothing to do with the contract, it is not acceptable

3. To stipulate a foreign condition as a base for concluding a contract e.g. I sell you the house when the value goes up 5%

GEM Stipulating cash penalties on late payments is not permissible because its riba

Example of a transaction that is concluded, executed, valid, and binding

1. Paying for Almaghrib class and attending it. Its valid, concluded (you have agreed on the price, etc), and its executed

2. Buying a car with cash, paying completely, and taking the key and take the car Example of a non concluded contract

1. You pay money in a vending machine, and nothing comes out. This transaction is valid, and its suppose to be binding, but its not binding, because its not concluded. However, the contract is concluded once you get your money back or your get the product

Example of a concluded contract and nonbinding

1. Option of returning the item makes the contract nonbinding 2. Charity and giving gifts are nonbinding contract. e.g. if you have pledged to give

$1000 to the Masjid, this is contract of charity, it is nonbinding, but you have


made a promise, so you must pay after pledging. According to Imam Shafi’e and Imam Hambali, there’s no obligation (as a transaction) to fulfill any promise. Yes, it is wrong, but you are not obligated to pay. According to Imam Abu Hanafi, if you have promised, you are obligated to pay because if you don’t pay, you might cause the person (masjid) some financial loss

Example of invalid contract

1. Buying alcohol

Aspects of a legitimate and legally accepted contract:

In order for any contract to be seen as an ‘aqd sahih (a legitimate contract) in shari’ah, it must be:

● Concluded ○ If the contract is not properly concluded, then it is void. After you have

checked the commodity, and agreed with the price, etc. then it becomes binding

● Valid ○ If the contract violated one or more of the conditions of the contract, then

it is invalid. e.g. selling alcohol The contract may be concluded, but its not valid. So, its not binding Islamically because its not valid

● Executed ○ If the contract is not executed (for example, the seller has not come into

possession of the object of a previously concluded bay’l salam contract), then the contract is regarded as being suspended until such time as it is executed. e.g. you made an order online, and have paid, so the contract is concluded. But the seller hasn’t ship it to you yet, so the contract is considered suspended. It’s not binding yet. While it’s still not yet executed, you have the right to cancel the order. But once the item is shipped, it has been executed, you can’t cancel it, because it is binding.

● Binding ○ If a contract is not binding (i.e. if options have been specified), then the

contract may be voided or made binding at the choice of the option holders

TYPES OF CONDITIONS IN A CONTRACT

1. Conditions that are part of the essence of the contract. Example: I buy the house and gain ownership immediately (i.e. no tenants).

1. Stipulate a second contract in exchange for the first contract.

2. Conditions that are for the benefit of the contract.


3. Conditions that stipulate a particular benefit for either the buyer seller and is not contrary to the essence of the contract

4. Stipulating penal conditions to ensure fulfillment of the contract.

Friendly reminder: Stipulating cash penalties on late payments is riba.

VALID CONDTIONS AND INVALID CONDITIONS

Valid Conditions:

1. Conditions that are part of the essence of the contract. There should be no ambiguity in the wordings – Ex. you sell the house with the condition that you will remove your belongings from basement after you return from hajj. This is ambiguous and you have to set a specific time period, and after that the buyer has the right to dispose of the goods if you don’t take action.

Example: To stipulate the immediate transfer of ownership.

2. Conditions that are for the benefit of the contract. It does not invalidate the contract. This is permissible.

Example: To stipulate that the price be paid in specific currency like US dollars ($).

3. Conditions that stipulate a particular benefit for either the buyer or seller and do not run contrary to the essence of the contract nor to its benefit. It benefits one of the two parties.

Example: The seller of the house stipulates to live in it for the next month or two. Or a car seller stipulates to give the car after 3 days so that he has time to buy a new car, but he gets the money now. Is that okay? Yes! But if something happens to the car, then the owner is responsible and he is borrowing it from the buyer. Or like putting a time period for a rental contract, but the seller may stipulate to renew the contract every year in lieu of changing market value of the property, so the contract will be binding only for a year though the buyer intends to rent for 3 years.

Reminder: YOU CANNOT MAKE TWO CONTRACTS IN ONE TRADE

4. Stipulating penal conditions in order to ensure fulfillment of the contract.

Example: If you cancel a banquet hall booking within less than 30 days from the event date, you are obligated to pay 30% of the total booking fees. This is justified since the customer is paying to compensate for the loss they incurred on the owner. These conditions are negotiable to mutual agreement.


Examples: Having to pay restocking fees on returned products. Non-refundable registration fees for a course/ or booking fees is like Bay’al urbuun = down payment and is permissible. It is a valid penalty.

But they cannot take the full amount of the money for a contract that was terminated by the buyer. There is difference between penalizing and exploiting. Exploitation is not allowed.

In contracts where you exchange money for a service, you can stipulate the condition of reserving part of the agreed price if the service is not satisfactory (ex: carpet cleaning services)

Question: Are all fines riba? No, not library fines.

Question: Someone buys a car and pays in installments with riba then sells the car to me for a higher price but no interest. This is tawarruq and sounds like money on money in a deceitful manner.

Reminder: Stipulating cash penalties on late payments is not permissible because it’s riba. This is money on money.

Invalid Conditions:

1. To stipulate a second contract in exchange for the first one.

Example: I sell you my car only if you sell me your laptop. But however, you can rent a house with the condition that you mow my lawn every week because rent is not transfer of ownership and you can set these conditions.

2. To stipulate conditions that go against the essence of the contract.

Example: I sell you my car with the condition that you cannot take it outside the street, or I sell you my house if you agree not to change the original paint or I sell/rent you my house with the condition that I have the right to visit anytime (The nail of Juha*!) or I sell the house with the condition that I still keep the title.

Example: The Rutgers family putting a condition on donating the Busch /Livingston campus: not to build any building on the private wildlife reserve.

3. To stipulate a foreign condition as a base for concluding a contract. A condition that has nothing to do with the contract itself.

Example: I sell you the house, the contract is concluded but the actual exchange will take place when the value goes up 5%., or you sell a car and close the deal but put the


condition that the buyer will receive it when the new model arrives. Another example: I will sell you the house but only if I get the new job I want. I will sell you the house if you change your name.

You have a transportation company and hire truck drivers. You get a contract for 5000 dollars and offer the truck drivers $3000. This is perfectly okay.

Another Reminder: Stipulating cash penalties on late payments is not permissible because it’s Riba. Even if it is in the contract, you cannot say that if the person is late, they pay extra.

If a person rents a house and then turns it into a zoo, even if not in the contract, there is a general understanding that he will live in the house and not put animals there, so the contract has been nullified.

CHAPTER 8

ADDING AN “OPTION” (KHIYAR) IN A CONTRACT

These are additional conditions that can be added to a contract, and will be binding.

Khiyaral majliss: Option of Meeting

Khiyar al shart: Option of Condition

Khiya al ru’yah: Option of Viewing - not available for viewing at the time of the contract

Khiyar al ta’yin: Option of Identification - commodity has to be specific

Khiyar al ‘ayb: Option of Defect

- The defect decreases the value of the commodity

- The defect was present prior to the conclusion of the sale.

- The buyer was oblivious to the defect prior to the conclusion of the sale.

OPTION OF MEETING (khiyar’i-majlis): The choice of continuing or invalidating the contract after it had been concluded while the buyer and seller are still in the place of the contract.

The place of the contract differs depending on the site where the meeting for the contract took place. A payment webpage or confirmation page on an online sale is


considered a virtual meeting site. If you delayed accepting the agreement then after like 5- 10 minutes the session expires, then the meeting is concluded.

Example: Leaving a store after concluding the transaction nullifies the option of meeting. Like in a “All Sales are Final” policy or no return policy.

This khiyar can be extended to any time frame based on the mutual agreement.

For trading gold and silver, the khiyar al majlis has to be in the exact same meeting and cannot be extended.

“If you buy it right now, you get it for 3,000 dollars.” Then you leave and shop around and return, that’s it, you have to buy it for the actual price of $3,500.

(al-bayyi’an bi’l-khiyar ma lam yatafarraqa) – Ibn ‘Umar narrated the Messenger of of Allah sallallahu alaihi wa sallam said: “The parties to sale have an option as long as they have not parted, except in sale with an option.” [Bukhari and Muslim]

Requesting to revoke a contract after it had been concluded and became binding is called ‘iqala and it’s not binding on either the seller or the buyer. This is option of revocation of a contract after it is concluded based on good will, without any return policy. Most stores accept iqaalah conditionally; they give store credit instead of returning your money. This is again another type of contract that is binding. They may or may not have an expiration date.

Shaykh says it is not haram to buy something with the intention to use it and return it before the return policy expires. However, there is an ethical perspective to the issue.

OPTION OF CONDITION (khiyar’l-shart): Making the condition that either of the two contracting parties, the buyer or the seller, has the choice to invalidate the contract within a specific amount of time, before the contract is finalized. Ex: the buyer puts condition that I will call you to finalize and if I don’t call you its cancelled.

(idha baya ‘ta fa qul la khilabah) The companion Habban b. Munqidh was a very simple person and used to be constantly fooled in business dealings so the Prophet (sallallahu ‘alayhi wa sallam) told him: “If you trade, then say no cajole (cheating)/laa khilaaba (no pressure on me and don’t fool me/ no hidden strings).” [Bukhari and Muslim] So meaning that “If I find out that you cheated me, the contract is invalid.”

Example: Placing a return policy of 90 days money-back guaranteed with no questions asked. This can be incorporated in the contract by the seller or the buyer. What if on day 91 you decide to return it? Nope, now the contract is binding. In this case, you can


nullify the contract only if you seek forgiveness from the seller. And also in this case, the seller can charge you extra for the extra days you took.

OPTION OF VIEWING (khiyar’l-ru’yah)

The right of the contracting parties to invalidate the contract upon viewing a commodity that was not seen prior to the concluding of the contract.

Example: To buy a car over the phone based on a description given to the buyer. He puts the condition that he will buy/conclude after seeing it if he likes it. Online booking for hotel becomes binding after you actually see the room. Otherwise, if the description matches perfectly, then you can’t just say I don’t like it for some other reason not in the contract like “Oh, I wanted the 7th floor”.

True story: A friend wanted to bring his faraway friend an American car. When the car arrived, the man who ordered the car backed off and refused because the car was previously a police car. However, this car fit all the descriptions. The Shaykh had to side with the buyer because although it fit the description it didn’t fit the general expectation that it is a civilian car.

T

his form of option is greatly disputed among Muslim jurists because it does not make the commodity clear, hence running contrary to one of the main conditions of a contract.

THE OPTION OF VIEWING IS VALID IF TWO CONDITIONS ARE MET:

The commodity has to be specific

The commodity was not available for viewing at the time of the contract.

Option of identification (khiyar’l-ta’yin)

THIS IS THE MOST DISPUTED OPTION amongst the fuqaha due to ambiguity. The disagreement is whether it has to be a specific and known item only or if it is enough to have different descriptions.

Example: In a development area, there are modular houses with all the accessories; the base house is 280,00 and with all the accessories is 400,000 – so if you agree to buy the house with accessories you have to be specific with what exact additions you are paying for. You cannot give the money ‘with whatever you choose’ style. Another example you buy sandwich (nonspecific) and tell the cashier ‘you choose whatever’. The buyer says, “I’m buying a laptop –this Dell or this Mac or this HP” while the prices are mentioned.


The sale has been concluded and is only waiting for execution by selecting one of the three items. Similarly in games – if you win you select any prize from these items; you don’t know when you are paying for the game what prize you will end up with.

For example, Musa’s story was that he could marry any of the daughters with the condition that he works the farm for 8 or 10 years. Now, can he work for 9 years? That is disputed among the scholars equally.

Ex: Ilmrush card – you are paying $580 for as many classes you can take – the service they receive is of the quality class of AlMaghrib, not the knowledge itself.

Option of Defect (khiyar’l-‘ayb): The right to invalidate the contract upon finding a defect in the traded commodity that was not made explicit prior to the sale, unless the products are sold ‘As Is’ and you have the actual product in front of you to inspect.

To what extent are hidden defects to be tolerated? Ex: If you buy a car 'As Is’ (nowadays lubricants and fluids are added so that the engine runs smoothly for few days and after the effects of these additives disappear and the car shows the troubles), and you ask for certain information from the seller, and they do not disclose it or tell you that it has no defects when they know it has some (in classical fiqh, this is identified as bay’ul musarrah = When a cow is not milked for a few days to show its full udders and deceive people that it produces a lot of milk), then this is not permissible.

This Option Is Valid If Three Conditions Are Met:

- The defect decreases the value of the commodity

- The defect was present prior to the conclusion of the sale.

- The buyer was oblivious to the defect prior to the conclusion of the sale.

You don’t have to disclose all the information, but you should let the buyer know if there is something wrong with product if they inquire. If you don’t know, just say I don’t know. Don’t publicize bad information about your product unnecessarily nor make up stuff or praise it extra.

Question: Do the 5 options have to be mentioned in a contract or are they by default included in contract? Ex: You buy furniture, and call store a week later, where is my furniture? Who is responsible?

Answer: It depends on what is considered normal in that market. If it’s usual to expect delivery, then they should deliver even if it’s not explicitly stated in contract. Otherwise, they don’t have to deliver.


ACTIVITY FOR CONDITIONS -

1. I will rent hall from you if you sell halal food – it’s a valid condition benefitting one of the two parties

2. Car rental conditions – they give the option of filling the tank or they will fill it, if you return without full tank then they charge you extra for convenience – valid option of condition

3. If you sell a house with the condition to use the basement/leave the belongings in basement for an unspecified time, this is invalid since the full ownership is not transferred; these are ambiguous terms. What does the buyer do with the goods if the owner does not show up? He tries to contact him or his relatives/friends, and you cannot sell the goods since you are not the owner of it. If the original owner does not show up in reasonable time, then you can sell the goods but it is not allowed for him to take that money, he has to return the money to the owner. If he sells it under the market value then the buyer is responsible to pay the difference.

The other option is to keep the goods in storage and the original owner is responsible for the charges. You cannot give it as donation; if you do so then you are responsible to pay the price to the original owner.

4. If you rent a house and the owner says not to use the basement or one room – this is valid because rent is for the available space that the owner offers.

5. Rent an apartment – with the condition that if you stay for 12 months then you get one month free, this is valid condition.

6. Marriage contract with the condition put by the wife that the husband should not marry second wife – the majority of fuqaha say this is invalid condition, but the Hanbali School of Fiqh says it is not invalid and that if the man agrees then it is a binding condition.

7. Leasing a car with the condition not to use the trunk – this is invalid condition since it is against the essence of the contract; use of a car means use of the entire car.

8. A masjid buys a property with the house with the condition put by the owner that he will give the house to them after he dies – it is invalid condition. Actual contract should give you full ownership and the term until I die is an ambiguous term. How can you fix the contract?

Change the contract – after taking full ownership and possession of the house, make a rental contract with the person.


CHAPTER 9

DEFECTS IN CONTRACTS

COERCION (Al-Ikrah)

Coercion occurs where force (of whatever nature) is used to produce a physical or legal action. It can be complete (causing threat to life or limb) or partial (causing inconvenience).

Different formats of ikrah –

A. That which invalidates a contract

Example: To force someone at gunpoint to sign a contract of sale against his free will to sell a property they would otherwise not sell.

If a husband forces his wife to sell the house she received from inheritance at a low price – this will invalidate the contract

B - That which does not affect the contract, like emotional threats for example: If you don’t buy this house, I will not love you.

The state has the right to force someone to sell a private property for public benefit (if there are no other alternatives for the state) this is valid since communal benefit takes precedence over personal benefit, with reasonable compensation paid to the owner.

Ex: of contemporary contracts on ikrah – father forces daughter to marry someone, car insurance required by law, paying taxes.

MISTAKE AND ERROR (al-ghalat)

It makes contract valid but non-binding, but you can make it binding it by rectifying the mistake.

Example: To give someone a diamond by accident when he was buying a crystal. If you agree to something verbally and the written agreement has a mistake then it suspends the contract till it is rectified or redone.

Question: What if you buy something defected and they say “ok, keep it, we will send you another one”? This is fine and is the choice and shows the kindness of the seller.

But can you rip an abaya and call in reporting a ripped abaya? Of course not, it’s your fault and you have to be honest and not abuse or exploit policies that are meant to protect the consumer.


FRAUD AND DECEPTION (al-ghubnu wa’l-ghish)

This will make the contract invalid.

Example: To buy a commodity extremely overpriced. Another is buying a car “As Is” which means if the owner says there is no defect in it and then there is a defect detected then the contract is invalid. However, if the seller says there is nothing obviously defective that he knows of but gives you the option to try it out for one week and gives you the option of one week if the car breaks down after one week then he is not liable, but you can revoke the contract on the option of iqalah, but if the seller disagrees then it’s his right.

The prophet (S) forbade a resident merchant from selling to a visiting merchant at a much lower price. Back then, the resident merchants used to live in that place and knew the prices and would go to wait outside for those coming in who don’t know the correct price for everything. They used to be deceived and want to sell the things they came with quickly and return home, even though the price in the center of Makkah is cheaper.

Selling generic products as genuinely name brand is fraud.

Selling jewelry 18K as 22K or gold plated as real gold is deceitful. Cheating or lying or photoshopping in advertisements is not honest as well.

UNFORESEEN CIRCUMSTANCES (al-zuruf’l-tari’ah)

Anything that comes up which would make you unable to fulfill your part of the contract.

It is ethical issue and it is up to the other party to forgive or give extension and relief. Example: Getting into a war or losing a job after concluding a contract.

You bought the house and it got damaged by a tornado along with your belongings in it.

Islamically, they should forgive you and just keep the down payment and that’s it. Because you just lost your job…how would you pay?

In this country they don’t care if you lost your job, or lost your mind, or lost your life!

Shaykh told the story of a man who owned ten houses in California and collected mortgage on them and when the economy went down in 2008, all the people that were living in them left and couldn’t pay and he was left with paying for all of them and this accumulated into hundreds of thousands of riba.


Shaykh’s review for the class where he asked us to give an example for each of the following:

Money for money: currency exchange

Non-money for non-money: exchanging a tiny house for a Firrari…can be?

Exhanging services: mowing the grass for babysitting or advertising for each other on your website.

Ayniyy: Fungible item---iPad 2

Non-Muddakhar: Milk (but if it becomes powdered or preserved, then it’s non-fungible)

4 contracts of trade: exchange, charity, investment, security

Contract of charity: Waqf, gift, loan

Obligatory Contract: If someone is afraid he will fall in haram, and has the means, then must get married. Zakah!

Invalid contract: One with interest, can be fixed by removing the clause for riba

Pillars of a contract: 2 contracting parties, item being agreed on, the wording of the agreement (written or spoken)

To be qualified to be in a transaction: Called Ahliyyat at-tasarruf

Need to be financially reasonable, aware, have the authority to conduct the trade, age (tamyeez), dhimmah.

These traits can be lost if the person is intoxicated: during primary stages of intoxication, they are still legally aware (‘buzzed’) but if they become (‘wasted’) then they cannot be held responsible.

Conditions that invalidate the contract: Oh, I’ll sell you the house when I am happy or when the stock market goes up. Juha’s nail. Or, I won’t sell you my house unless you sell your car. I will buy your house if you marry my sister. I will lend you 500 dollars if you babysit my kids. I will lease the house to you as long as you don’t use the kitchen. In this case, the kitchen is an essential part of the house and stopping the tenants from using it is contrary to the essence of the contract. But if a house has 6 rooms, you can say ok, but don’t touch the 6th room because I want to keep my things will be there.

5 options we can put in a contract:


Khayar al majliss: Once you step out of the store, the price goes up. Or then it won’t be for sale.

Khayar al shart: You can set a condition such as ‘Sales are Final’.

Khayar al ayb: If it’s ripped or defected, you can return it.

Khayar al ayn: Once you see it and it’s as you ordered, then the sale is binding.

Khayar at-ta’yin: If the item is not what you expected you were buying, then you can return it.

4 major reasons for invalidating a contract:

Coercion, deception, mistake and error, unforeseen circumstances

CHAPTER 10

SALES AND TRANSACTIONS

Definition of sale (al-bay’) or trade: The classical definition is: A contract for the exchange of commodities based upon mutual consent (mubadalah mal bi mal bi’l-taradi). Basic definition: wealth for wealth based upon mutual consent.

The modern definition is: “The exchange of a specified property or permissible service for its like or for a debt to be paid (deferring the payment later, i.e-- buying a book and paying for it two months later), transfer of ownership (i.e--installment payments, lease to own scenario), not based on usury, and not a loan (YOU CANNOT MAKE MONEY OFF OF LOANS/not giving money and taking more money in return).” This has to do with money for commodity, not money for money.

Allah (SWT) made al-bay’ halal and riba haraam.

The permissibility of sale is clear in the Qur’an, Sunnah and ijma’ of muslim mujtahids.

Understanding the sale contract:

1) It’s a compensatory (you get something in return/mu’awadah) contract and the opposite of a charity contract.

And remember, if you give loans: can you charge people a processing fee for the people doing the paperwork/lawyers? Generally…No! Loans are a CHARITY contract. It is invalid in essence, however…it can be justified to use administrative fees. Back then, people used to pick up loans physically but nowadays, we wire it and there are extra charges.


THE GENERAL RULE: You cannot make money from loans

2) The contract has to be legally accepted.

Islamically halal and Islamically permissible to trade. An illegal transaction: buying pork products and buy gold with a deferred price. Even if there is mutual consent/even if you are selling it to non-Muslims.

3) Involving at least two contracting parties who are legally competent to carry out business dealings. For instance, a child can’t be a contracting party for a major contract like buying a house, but you can get a cup of lemonade from kids.

There was a sahabi who was always getting punished for drinking and one sahabi insulted him behind his back for his persistency at doing sins. The prophet (S) heard that and said, “Do not assist the Shaytaan against your brother, for he loves Allah and his messenger.”

Brother mentioned a restaurant that gives people liquor free so they can be enticed into spending more money than planned or buy more.

Two people agreed on a transaction. So the buyer runs to the bank to get the money and comes back but the other man said oh, no I changed my mind. It’s too late since the contract is binding and they agreed and the only way out is for the seller to ask the buyer for forgiveness.

Types of Sales and Transactions

Considering the nature of the commodity:

1) Money for an item of value (bay’un mutlaq). Exchange of money for a commodity.

2) Money for Money (bay’l-sarf). Example: Dollars for Euro, Gold for Silver.

3) Item of value for another item of value (bay’l muqayadah). Example: eggs for bread, apples for oil. This is similar to what we understand as barter trade. Barter trading still exists, like in Craigs list, pawn shops, and the Amish people still use barter trade. Like trading in your car for another car and paying the difference in cash.

**Fact: Do you know that government has the right to do tas’ir or setting a price limit during difficult time for the greater benefits of the people?

**Profiting from a business transaction has no limits and is permissible.

Considering the nature of way deciding a sale’s price:


1) Negotiating the sale’s price without disclosing the cost price (bay’l-musawamah).

The bargaining technique--when the price is not set, you can negotiate the price without knowing the cost of the item. You can absolutely negotiate prices, its halal. Most Muslim countries deal with bargaining, like in Saudi. Since gold is now exchanged for some currency, negotiation may be allowed, but ideally it should be based on market value and weight.

2) Negotiating the sale’s price after disclosing the cost price to determine the margin of profit or loss (bay’l-amanah). For example, someone is harassing you to lower the price of a commodity and you disclose the cost price with the intention of having the buyer pay a higher amount. In this situation, the profit margin is not set. Ex: You’re a seller and you disclose the cost price as $30, but ask the buyer to buy it for a higher price, in which you are not setting the profit margin, rather wanting the buyer to name his price higher than $30. The seller is leaving the profit margin to the buyer.

This comes in four forms:

a) Bay’l-Murabahah: Is a sale where the seller names the profit mark-up that he is applying to the cost price of goods that he is selling and agrees on a sale price with the seller on that basis. The seller should name him costs truthfully. Example: Seller sets the exact profit. Seller says he paid $30 for an item, but wants $40 from the buyer. The cost is disclosed and profit margin is set by the seller. These so-called islamic banks in real estate buy it for $40,000 and then sell it back to you for $52,000 ($12,000 in profit) and the reason you did not purchase it directly is because you did not have the money and the Islamic banks act as a third party. They call this murabahah, but this not really murabahah at all. It’s murabahah if you already own the commodity and sell it with disclosing the cost price and giving the margin of profit. An example of murabahah is when investment companies purchase cars for $40,000, which are now under their ownership. People then purchase the cars from these companies for $52,000 and are making installment payments.

b) Bay’l-Wadi’ah: Is a sale when the seller names the loss mark-up that he is applying to the cost price of goods that he is selling and agrees on a sale price with the seller on that basis. The seller should name his costs truthfully. You essentially want to get rid of the product, by telling the buyer up front your cost, but that you’re ready to rid yourself of the product by selling it to them at a lower price. This is permissible and is still considered fair trade. So the seller says, “Listen, I got it for 50 but I will give it to you for 45.” However, you shouldn’t do this with the intention of taking a loss to kill the competition and make other business go out of business. This is considered unethical.


c) Bay’l-Tawliyah: Is a sale where the seller names the cost price of goods that he is selling and agrees on it as a sale price with the seller on that basis. The seller should name his costs truthfully. In this scenario, you are not asking for profit, but at the same time, you don’t want to lose. Just pay the cost price.

d) Bay’l-Muzayadah or auctioning is a process of selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. This is allowed. The price is not set yet, so the sale is not final and you can negotiate via auction. Beware that the prophet (S) warned Muslims against buying each other out.

One day Jabir ibn Abdillah goes to the market and likes a horse and buys it. Then Jabir asks for the price and the seller gives it to him for 500 for example. Then Jabir takes the horse and as he is leaving the market he looks again at the beautiful horse and feels that the price was too low so goes back again and tells the merchant, “This horse is worth way more. Here is a hundred dollars more.” Then he was leaving and then turns back again and pays another hundred. He kept going back and forth until, Jabir, the buyer, was comfortable with the price!

There is a TV show called ‘Storage Wars’ where they get boxes and the seller is not allowed to peek inside and buys it. Is this halal? No, because this is uncertainty and chance and we do not use chance to profit. If the seller is not allowing you to look at it, the sale is forbidden.

Sources of prohibited profit in contracts/haram ways of dealing are:

1) Trading haram items

2) Cheating and lying

3) Extreme deceit

4) Monopoly

You can pay an entry fee for an auction, but they cannot charge you per bid, then that would be haram!

Considering the nature or way payment is given:

1) Payment paid and commodity is delivered (al bay’l-munajaz aw al-naqd): This is a cash sale. Money for the commodity at the same time. This is how you should purchase gold/silver and exchange of currencies (i.e: dollars for euros).

2) Payment deferred and commodity is delivered (bay’l-nasi’ah): You get the commodity, but payment is deferred. It’s due in one week and one week later he comes


and says sorry can I give it next week? In this case the seller can say ok, but he can’t say you have to pay more now.

PAY ATTENTION: Can you say…

1. If you pay now, it’s $500

2. If you pay in 3 month installments, it’s $600 overall.

Yes, this is permissible because the price is fixed either way from the beginning! So, this is zero interest. You can’t make an unknown amount of money depending on the future; it has to be fixed at the time of the contract. The test is: at the end of the contract, do you know how much you will pay? You have to know the fixed price.

3) Payment paid and commodity is deferred (bay’l-salam): The cash is given and commodity is deferred. We use this when we purchase via ebay, online purchases.

Islamically, we are not allowed to buy food or harvest if it has not grown yet or shown signs of ripening.

4) Both payment and commodity are deferred (bay’ al-dayn bi’l-dayn): Trade a debt for another debt. Both payment and commodities are deferred. This is speculation. An example of this is in oil purchasing: oil contracts are being sold from companies to companies, while the oil still remains in the earth. We are not allowed to sell debt for debt. Another example is: You want to pre-order the new IPAD, but you’re unable to do so, but your friend was able to do so (implication is your friend’s credit card has not been charged as of yet) and he agrees to sell you the iPad before he actually receives it.

George Bush Sr. travels from Texas as a representative from Exxon Mobil. He meets with the king of Saudi Arabia and they secure a 5-year contract for oil from Saudi Arabia at 50 dollars per barrel. Then he comes home and calls the speculators and tells them we have oil at 55 dollars a barrel. Then the merchants take the oil and sell it internationally for 60 dollars a barrel to Europe and then Europe sells it to their companies for 65 who sell it to the European merchants for 70 dollars per barrel until at the end it gets to us the consumers at 100 dollars per barrel. This is haram, they are not selling oil, they are selling that which they do not own and is still in the ground. This is debt for debt. If people followed the Islamic financial system and sold what they own, then the prices would never be this outrageous.

So you can contract something that is legally yours and in your possession, even if you don’t have it with you at that moment.


I am a fisherman. Can I make contracts with restaurants for fish before I catch the fish? When my boats are still in the harbor? No. But what if I caught the fish and they are on my boat, can I radio someone to start making contracts?

What is the meaning of possession? Is it by signing the contract or actual physical delivery of the item? It differs from item to item. For houses, it’s the contract. For movable things, fruits, it’s when it is in my possession. So in order to sign a contract with someone to sell something, legal possession of ownership is not enough.

CHAPTER 11

PROHIBITED SALES

Prohibited sales are considered illegal for a few reasons:

1) The contract did not fulfill its conditions and legal requirements.

Example: One of the 2 contracting parties is legally incompetent.

2) The contract involves illegal financial commodities.

Example: Such as riba (usury) or gharar (uncertainty). The greatest example of this is insurance.

3) The contract is causing damage outside the contract’s limit.

Example: Monopoly of specific essential commodities and sell the items at a high price. Walmart! Berkeley banned it from going there. Also, when only AT&T could offer the iPhone, this was the same idea. But in this case, it is halal because it is not an essential basic human need.

4) The contract is concluded contrary to some other circumstantial laws of Shari’ah.

Example: Trading on Friday during Jumu’ah salat (time of jumu’ah for you in your area), even if it is your son, your wife, your daughter—the prohibition is the sale itself. Question: We have three jumu’ahs in our masjid. Just wait until the first one is over. 2nd Question: If you have an online website, you can keep the service open during Jumu’ah. 3rd question: You have an airport or a police station…you need to keep it open. 4th Question: Can a sister drop off her husband at Jumu’ah and goes shopping? No, because the prohibition is for the sale itself. 5th question: Can we sell to a non-Muslim on Jumu’ah? No. Again, the prohibition is for the sale itself.

As a Muslim, you can sue. But you do not fight for more than you deserve. Asking for $10 million for emotional distress is too much.


Types of Prohibited Sales:

1) Selling a debt for a debt (bay’ al-dayn bi’l-dayn).

Example: You owe Ahmad $100 and Ali owes you $110, so you sell Ali’s debt to Ahmad with the extra amount included to remove your liability for his debt.

Example: Credit card companies sell their debt to collection agencies.

2) A conditioned sale (bay’un wa shart). The condition benefits one contracting party.

Example: I sell you this phone with a condition that you don’t jailbreak it.

3) Two contracts in one sale (bay’atani fi bay’ah).

Example: I sell you this book for $100 deferred until the end of the month. When it becomes due, the buyer asks for extra time. After the sale has already been concluded, the seller sells the book again for a higher price.

*A local merchant is allowed to broker for a visiting merchant if the visiting merchant was familiar with the local market and was familiar with the value of his commodities and agrees to the service of the local merchant.

4) Selling upon the sale of another person (bay’ al-rajuli ‘ala bay’I akhihi).

Example: Aisha agrees to buy a purse from Fatima for $100. After the sale has been concluded, Safiyyah offers Fatima $110 to give her the purse, or Hafsa offers Aisha the exact same purse for $90.

*Auctions are exempt from this prohibition because the sale has not been concluded yet until the final bid.

5) The resident action as a broker for the visitor (bay’ al-hadir li’l-badi).

Example: Fahad came from overseas to the US with good commodities. Khalid is a local merchant. He tells Fahad not to go to the marketplace, and he will sell the products for him. Fahad does not go the marketplace and never knew the exact value of his commodities in the market. Once the visiting merchant enters the marketplace and knows the prices, then it is halal.

6) Selling forbidden commodities or services (bay’l-muharramat). Haram service.

Example: Selling pork products.

Example: Selling pet dogs or offering fortune-telling services.


7) Selling after adhan of Jumu’ah (al-bay’ ‘inda adhan’l-Jumu’ah).

Example: An adult who is obligated to attend Jumu’ah, staying in the care in the masjid’s parking lot buying online using his iPad after the first Jumu’ah in that masjid was called for.

8) Selling the unknown or trading uncertainty (bay’l-gharar). Based on ambiguity: the price, description or amount.

9) Dealing with riba (al-ta’amul’l-ribawi). Covered later in detail.

Four Main Defects in Contemporary Sales:

1) The contract involves a legally prohibited commodity.

Example: Selling Pork-product based cosmetics.

2) The contract involves the exchange of riba.

Example: Buying furniture with 5% interest for 48 months.

3) The contract contains gharar (or extreme uncertainty).

Example: Buying a sealed container (you know it’s a laptop, but are unaware of the condition) off eBay.

4) The contract stipulates conditions leading to a legally prohibited practice.

Example: Signing a contract of sale that includes deferred payments and stipulates charging for late payment fees.

Four Main Defects in Contemporary Sales:

1. The contract involves a legally prohibited commodity or service. Example: Selling pork products based cosmetics, wine or beer, drugs, prostitution, riba-based service, life insurance, opening a casino etc.

2. The contract involves the exchange of riba. Example: Buying furniture with 5% interest for 48 months.

3. The contract contains gharar (or extreme uncertainty). Example: Buying a sealed container off eBay.

4. The contract stipulates conditions leading to legally prohibited practice. Example: Signing a contract of sale that includes deferred payments and stipulates charging a late payment fees. Other examples could be conditions leading to riba, or causing gharar, or


forcing someone to sell or taking property through coercion. If the initial structure of the contract is halaal, yet the conditions are haraam, you have to modify the contract to make it legally executable.

Penalties (such as late fees) for utility bills are different than those for loans. Utility bills are charges for a service you use (like water). If you fail to make a payment for a service provided for you, they will assess a late fee. On the other hand, a late fee on a credit card payment is haraam because the late fees are being assessed on an interest-based loan; the initial condition, i.e. interest, makes the contract haraam.

Chapter 12

Explaining Riba and Gharar

Dealing with Riba (Al-Ta’amul’l-Ribawi)

The only halal riba you are allowed to use and include in any transaction is when you engage in riba with Allah.

Definition of Riba

A literal meaning of riba in Arabic is “excess” or “growth”. This makes for an interesting comparison with the word “zakah” which can also mean “growth”. Zakah is the only halal growth you are allowed to seek.

Allah destroys riba and He increases sadaqah. When it comes to giving, if you give 1, you get 10 to 700 times, or even more, in return from Allah. He multiples it however much He wishes.

Eventually, riba boils down to earning money on money. No actual transaction of sale, or trade of tangible items, or exchange of commodities occurs.

Categories

A riba transaction features one or both of the following characteristics:

1. A surplus (riba al-fadl) in the amount of one countervalue over the other in barter transactions of specific commodities. So, whenever you exchange specific categories of commodities, make sure you make the exchange equal in a certain way. The shari’ah has classified riba al-fadl in 6 categories of commodities. When you exchange one commodity with excess.

2. A delay (al-nasa’ or al-nasiah) in the settlement of debts or loans involving more money than the principal OR in the settlement of one or both countervalues. This is riba accumulating over a loan. This is the more prevalent form of riba today.


The Sin of Riba

Allah has mentioned many crimes in the Qur’an such as adultery, theft and cheating, but riba is the only sin foe which Allah has declared war against its perpetrators. The seriousness of the sin of riba and its grievous consequences are indicated in the Qur’an and hadith as follows:

“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. 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. Deal not unjustly and you shall not be dealth with unjustly.” (al-Baqarah: 278-279)

In 2008-9, when real estate market collapsed and banks started falling apart, you would literally think of it as a situation of war.

Ibn Masud (radyAllahu ‘anhu) reported that the Prophet sallalahu ‘alayhi wa sallam said: “No one takes too much Riba except that is always leads to utter poverty.” (Sunan Ibn Majah, 2270, Sahih)

On the authority of Ibn Masud (radyAllahu ‘anhu) that the Prophet sallalahu ‘alayhi wa sallam said: “ …cursed the one who takes the riba, the one who gives riba, the two witnesses to it, and the one who writes it.” (Sunan Ibn Majah, 2268, Sahih)

Who consumes riba today? Generally, banks do. Who is the one giving riba? The borrowers.

Who are the two witnesses? Lawyers, accountants, notaries. Who is the one writing it? The clerks who are giving receipts; they are all involved in this. Today’s banking system is based 100% on riba.

Allah says in the Qur’an:

“And [for] their taking of usury while they had been forbidden from it, and their consuming of the people's wealth unjustly. And we have prepared for the disbelievers among them a painful punishment.” (al-Nisa’ 4:161)

Fact: Riba was prohibited in all previous revelations.

Another crime similar to this is wine-making. The Prophet sallalahu ‘alayhi wa sallam forbade it and he cursed 6 kinds of people connected with it. Wine (rather khamr) has been called umm al-kabaa’ir – the mother of all evils. A drunkard does all other sins while drunk – lie, cheat, kill, fornicate, drugs, and lots of other evils just by consuming


wine. Riba is similar to that but much more dangerous. The effect of wine is limited to the one who is consuming it, but the effects of riba can plague an entire society.

Riba in Arabia in the Time Pre-dating Islam:

It was practiced in two forms:

Riba in Loans Riba in Sale and Trade

The Ribawi Items

The items to which the riba prohibition applies are termed the “ribawi” items. These are defined in the hadith reported by Abu Said al-Khudri (radyAllahu ‘anhu) that the Prophet sallalahu ‘alayhi wa sallam said: “Gold is to be paid for by gold, silver for silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment made hand to hand. He who makes an addition to it or asks for an addition deals in riba. The receiver and the giver are equally guilty.”

(Sahih Muslim, 2791)

Fact: Six ribawi items are defined here. They include monetary items (gold and silver) and non-monetary fungible items (the remainder), although it should be noted that all six items have the capacity to be used as money. For example, salt has been used as a form of money in Egypt, Ethiopia and Rome, while barley fulfilled this function in ancient Sumeria.

They need to be exchanged for exact same amount and given at same time, and not to be given in surplus. 10 ounces of gold should get you 10 ounces of gold in return.

What if you give 10 ounces of gold for jewelry to a jeweler and then, in return get 7 ounces of beautifully crafted jewelry of gold? No, their weights must be same. Raw gold and crafted gold have to be exchanged in exact same amount. However, in the US they have already priced gold jewelry. Islamically, you pay by the weight; that is how you solve the problem of buying jewelry.

Based on this hadith, we have a couple of Rules for trading in same category, same species:

Same quantity


Hand in hand Same meeting

Case two: Same category, and different species Rules:

Quantity may vary At the same sale meeting Hand in hand

3rd category: Different categories and different species

So everything could vary, quantity, could defer time

What about a truck of t-shirts for two trucks of shoes? It’s not riba alfadl, because it is not one of the six items.

What about a car for a car? It’s halal, because not one of the six items

What about an apartment for a house? It’s halal, because it’s not one of the six items.

So the ulama have argued and decided to just keep these six items as ribawy items and not add any other items to this category.

How can one make halal exchange in these 6 categories?

Categories and Species of Ribawi Items

CATEGORY 1: Monetary Items

SPECIES: Gold and Silver (and what replaces them of paper money and currency)

The reason for riba: Monetary purpose (mutlaq-thamaniyah) – The value of commodities.

Question arises: Why did Allah forbid exchanging with riba/surplus on these two items?

‘Ulema argued on why this was done. Back in the day when people used silver and gold as currency, they valued different commodities using these two. If they wanted to buy bread, they would say how much? They were told 3 silver coins, or something else for 5 gold coins.

Today, paper money has replaced gold and silver as our currency. So, whatever has replaced silver and gold as currency will be included in prohibition for riba.


Notable exception is the position of Shaykh al-Uthaymeen rahimahullah. He maintained that when it comes to exchanging paper bills for coins you can fluctuate the quantity, and he was very firm on this position.

Question: If a creditor loans $100 to someone but accepts $95 in return, has the debtor earned riba in this case? No, because the debtor did not get $5 extra, just $5 less. Riba happens on the money of the creditor, not the debtor. The rest is charity, which is permissible. If the creditor were to receive $105 back in return, then that would be a transaction involving riba.

How about exchanging plastic cards, like credit cards? Are you allowed to take 2 credit cards in exchange for 1 credit card? The answer is, yes! Credit cards are not considered values of commodity. The same goes for exchanging checks, as long as, the money being offered is the same as the money being received by each party.

CATEGORY 2: Food Items

SPECIES: Wheat, Barley, Dates, Salt

The reason for riba: The ‘ulema argued over the reason for this prohibition as well, and arrived upon three distinct possibilities –

1. Food item (ta’am): If it is the food item itself, then these 4 would not be unique to other foods. Why not include meat or vegetables to this category?

2. Sold in weight or volume (mikil aw mawzun): If the consideration is weight or volume then other items can be included in this category, such as rice, which is still food and can also be measured in terms of weight or volume.

3. Staple food (qut muddakhar): Staple food, which can be saved for later, i.e. non-perishable.

The most appropriate reason for prohibition appears to be last one, i.e. it being a staple food.

Can you make qiyaas on other items in use today? When the Prophet sallalahu ‘alayhi wa sallam counted these 4 items, did he mean these 4 items only? Many ‘ulema maintained that it is limited to these 6 items only. In their view, there is no riba when exchanging (say) apricots.

Similarly, there is no riba in exchanging curry, or saffron, so you can exchange different amounts for those items.

Rules of Exchanging Ribawi Items


CASE ONE: Same category and same species

Rule:

Example 1: Gold for gold

-concluding meeting (i.e. after finalizing the sale, the seller and the buyer cannot agree on next day for delivery).

Example 2: Dates for dates

The exchange should not be delayed from the contract session.

While exchanging gold for gold, or dates for dates, there has to be same quantity on both sides, at the same sales meeting, exchanging in same session and it has to be done hand in hand. So, if I am buying 2 boxes Medjool dates from California for 5 boxes of Madina dates as an exchange, I cannot do that because, even though the exchange occurs hand in hand and in the same meeting, the quantity is not same.

CASE TWO: Same category and different species

Rule:

Example 1: Gold for Silver

10 oz. of gold bracelet for 30 oz. of silver necklace.


The exchange should not be delayed from the sale-concluding meeting (i.e. after finalizing the sale, the seller and the buyer cannot agree on next day for delivery).

The exchange should be immediate between the contracting parties at the same time.

Example 2: Wheat for dates

Two tons of wheat for one ton of Ajwah of Madinah dates. The exchange should not be delayed from the contract session. The exchange should be immediate between the contracting parties at the same

time.

The quantity can vary; it can fluctuate, but it has to be concluded in one meeting, and the exchange should be hand in hand i.e. no deferred delivery.

Q: Is it permissible to exchange 10 ounces gold bracelet for 25 ounces silver necklace?

A: Yes, as long as it is done in same meeting, and hand in hand. It has to be done by weight and so if the contracting parties know the exact weight amounts, it will be ok.

Same ruling applies when it comes to dates and salt. For example, 5 tons of packaged dates with 15 tons of packaged salts, so long as the exchange is immediate and hand in hand.

Q: While exchanging gold for silver, does the dollar value of both commodities need to be the same i.e. $1000 worth of silver for $1000 worth of gold?

A: No, you can exchange 5 ounces of gold for 100 pounds of silver. Quantity can vary since they are not the same species. 5 ounces of gold might cost 50 dollars, but 100 pounds of silver may cost $1000. Yet, you can do that exchange in this scenario as the quantity can vary, as long as the exchange is done hand in hand.

Similar to this example is currency exchange: you exchange values of commodities (such as dollars for euros) when you do money exchange, provided it is done at the same place, hand in hand. Quantity can vary; you can make a profit by finding the best exchange rate for your dollar.

CASE THREE: Different categories and different species

Rule:

y may vary


Just like a regular sale; buying online, delivery deferred etc.

Example 1: Gold for dates

10 oz. of gold bracelet for a ton of dates. The exchange may be delayed from the sale-concluding meeting (i.e. after

finalizing the sale, the seller and the buyer can agree on a different day for delivery).

The exchange does not have to be immediate between the contracting parties.

The rule here is that once you cross categories, everything becomes permissible. So, the quantities involved can vary, one can delay sale contract and also defer exchange of commodity.

Examples:

Q: Say, I want to buy 10 tons of Madinah dates; can I do contract over the phone? Can I pay $5000 for this sale? Can I make the contract but delay payment until the dates are delivered to me?

A: Yes, you can do all of the above. It’s allowed because the exchange is of different categories and different species.

Q: Is it allowed to trade a truckload of clothes for two truckloads of shoes?

A: Yes, allowed. It’s not riba al-fadl (surplus) because it’s not one of the six ribawi items.

Q: Can we exchange a car for a car? A Mercedes for a Toyota?

A: Yes, allowed regardless of value for two cars. Again, not one of the ribawi items.

Same rule applies for exchanging a house for an apartment. You are exchanging actual assets, and not simply making money off of money.

Wisdom behind prohibition of riba in the six essential items:

If we were to exchange these six items with excess and riba, it would influence and affect the whole financial system and the stability of the market. The ribawi food items back then were most essential to the survival of the community.

Riba in Loans

Scenario 1: Riba on mature loans


When the loan is given with a final due date. The Arabs used to say: “Give me some more time and I will increase your return.”

This is the equivalent of late fees in modern day.

Let’s say someone takes $1000 from you and the deadline for return is 2 months. After 2 months, he is supposed to pay back $1000, the exact same amount. However, he comes at deadline time and says I do not have the money and requests an extension. If you say that it is fine, as long as he agrees to pay you 5% more than the principal then this is the riba that the Arabs used to practice; riba nasi’ah.

Scenario 2: Riba on deferred loans

Practiced in two ways:

this case, there is a condition of increase right at the time of concluding the loan contract.

Example: Buying an appliance with zero interest for first six months. If you are not able to pay it off within deadline, they charge you interest from the very first date you bought the appliance.

term, and the interest installments are paid monthly.

Riba on deferred loans occurs in two ways – at the time of taking the loan, the contract stipulates that you will pay interest from beginning; and the second form is when the contract stipulates that you pay riba now and pay principal later. What about bank loans (mortgage, for example)? It is classified as a deferred loan – you take a $2000 loan and you pay it on a monthly basis.

Student loans can be both, depending on whether they are subsidized or non-subsidized. They inform you that if you do not pay it back in full, in 6 months, they will start charging you a very high rate of interest.

Another form of loan is a car loan. What form of loan is that? That is the second form. Usually the borrower starts paying riba before principal. They will divide the money you are paying based on that. Some of it you pay towards the principal and some towards the interest. Once the interest has been collected, you start seeing a deduction in your principal. Business loans from bank are the same thing.


Another form of loan is overdraft on a checking account. If you withdraw more than your principal, the bank will charge interest on that amount.

Recognizing Riba in Loans

It is widely reported from earlier Imams and most authentically from ‘Ali ibn Abi Talib (radyAllahu ‘anhu) that he said: “Every loan which brings some kind of benefit to the lender is riba.”

While any benefit contracted in favor of the lender at the time a loan is made is regarded as being usurious in Islam, even where that benefit is small in amount, the payment to the lender of a benefit after the loan has been contracted is discouraged or prohibited.

Tajir says: Bay’ ul ‘inah is said to take place when a commodity is sold to the buyer with the money to be paid in the future and then the exact same commodity is repurchased from the buyer with a lesser amount of money paid immediately.

Anas ibn Malik (radyAllahu ‘anhu) reported that the Prophet Muhammad sallalahu ‘alayhi wa sallam said, “When one of you grants a loan and the borrower offers a dish, he should not accept it, and if the borrower offers a ride on an animal, he should not ride unless the two of them have been accustomed to previously exchanging such favors mutually.”

A subtle form of riba in loans is when the creditor asks for a favor as part of that loan. So, if a borrower asks for a loan and the creditor agrees provided the borrower’s son can come and mow his lawn then this is not acceptable. They can make this condition part of a separate contract (say, the borrowers son will be paid a small amount for his service by the creditor) but cannot include this condition in the original one without it becoming riba.

On the other hand, if the borrower offers a token of appreciation to the creditor at the time of returning his loan then that token is fine, provided there was no such expectations on behalf of the creditor nor was there a condition stipulating that in the contract to begin with.

Q: What about reward points earned for purchases made on a credit card?

A: When it comes to points, it all boils down to whether you need the credit card, not want it. If you really need it, earning points in this case are ok, coming from the lender, not the borrower.


Q: Contract stipulates that in 7 years you should pay $21,000. What if you pay it off earlier and only pay $19,000. Is this halal?

A: Yes! The creditor can forgive, that’s fine. But they can’t charge you more.

Common Misconceptions About Riba

o Misconception: The Prophet sallalahu ‘alayhi wa sallam did not live long enough to interpret the verses which prohibit riba. The verses are therefore mutashabihat (unclear) and cannot be the basis of a ban.

Clarification: The reality is that the ban on riba was revealed in 2 AH (very early in the history of Islam), at around the time of the Battle of Uhud. Sufficient time existed between then and the Prophet’s death to fully explain the implications of it. The verses in Surat al-Baqarah reiterate the ban on interest and enforce a retrospective ban on all previous loans and any interest due at that time.

o Misconception: Riba refers only to usurious loans on which “excessive interest” is charged. Modern banking loans do not fall within this definition.

Clarification: This argument relates to the verse in Surat Ale-‘Imran which states,

“O you who believe, do not consume riba, doubled and redoubled. And have taqwa of Allah so that you may be successful.” (Ale ‘Imran, 130).

However, the rules of tafsir do not permit us to interpret the verse as confining riba to occasions in which principal is doubled or redoubled. Rather, the verse highlights a consequence of riba. The position that any benefit to the lender is indeed a form of riba is confirmed in Surat al-Baqarah, where Allah states that “but if you repent you shall have your capital sums.”

Prophet sallalahu ‘alayhi wa sallam never made difference between double or less than double or more than double in explaining this ayah, therefore, it should be taken generally. The “double and redouble” shows the ugliness, worst case scenario of riba; this is useful in explaining why it is so harmful.

o Misconception: The Qur’an only bans riba on consumption loans, not on loans for commercial purposes.

Clarification: The ban in the Qur’an is an absolute ban on riba. No distinction is made between consumption and production loans. Neither does the Sunnah of Muhammad sallalahu ‘alayhi wa sallam make any distinction. Proponents of this idea have argued that commercial loans were not in existence during the time Prophet sallalahu ‘alayhi wa


sallam, hence they are not covered by the ban. However, commerce and the financing of commerce were both common in Arabia at the time, and commercial loans would not therefore have been alien to the Arabs.

One cannot make such statements without proof from the Quran and Sunnah. In fact, general rule in usul al fiqh dictates that something should remain general until you bring evidence to suggest qualification or specification.

o Misconception: Only riba’l-jahiliyyah was banned by the Quran, and not the interest present in today’s commercial transactions.

Clarification: Riba’l-jahiliyyah relates to a practice whereby a loan was advanced, or a trade debt was created, for a certain period with no riba charged. If, at the end of the period, the capital had not been repaid, then the loan would be rolled over for a further period and riba would be applied. Those arguing this position believe that because modern commercial loans specify interest rates from the outset of a transaction, they do not fall within the ambit of riba’l-jahiliyyah. However, the ban in Surat’l-Baqarah does not specify any such exception and none is evident elsewhere in the Qur’an or Sunnah.

Selling of the “Unknown” or Trading Uncertainty – بيع الغرر (Bay’l-Gharar)

In Arabic, the root of the word gharar, appears variously with the meaning of fraud, deception, delusiveness, peril, uncertainty and fallaciousness.

As Allah says in Surat’l-Hadeed, 20 “The life of this world is only a deceptive pleasure”

- Ghuroor in this ayah means deception.

Gharar is therefore a deceptive transaction or any transaction that involves uncertainty. The most common translations for gharar are deception and uncertainty. Deception implies an ill intention. However, gharar is not based on intention and therefore, uncertainty is an important translation. If there is any uncertainty in a transaction, it is considered as a deception by default.

الغرر بيع وهي الحصاة بيع هي وسلم هليس هلال صلى هلال رسول نهى

The Prophet sallalla‘alayhi wa sallam forbade against the sale by the stone and from the sale based on uncertainty. (Reported by Muslim)

The Sale by the Stone: A customer pays upfront, and is then given a stone to toss on the items on display. He is then given whichever item that the stone falls on or if it falls on nothing, then he gets nothing. Even though the customer is able to see all of the items, and knows that he is getting one of these items for sure, it is still not allowed. You can’t


make it halal by saying “Oh, you are paying for the opportunity or the chance or the experience of throwing the stone, not the actual item you get.” At the end of the day it’s still gharar (uncertainty).

Another example is the games where you pay 50 cents and then try to move a robot arm to get a specific prize like an iPad.

Q: But how about paying an entry fee to go to a public park to go fishing but then you catch nothing? In this case, you are also paying for the chance or opportunity to go fishing, not for the fish.

A: There is a distinction between the two in that there is no skills involved in the stones or the claws game and the vendor is exercising control over your chances. They put things in a way so that it’s almost impossible to score.

Also, the claws machine is timed and you have one chance. But the entry fee allows you to spend the whole day there and do whatever you want. So the concept of chance is much greater in the claw games than for the entry fee so the games for the claws. But the Shaykh does not conclude that it is 100% prohibited to play such a game, because it can be argued there is small level of mental and physical skill involved in some of these games. In some games, like slot machines, however, it’s pure chances and prohibited.

So any games based on chance, such as cards, monopoly, games with dices, you either get good cards or not and is usually considered prohibited. In some of these games, however, there could a considerate amount of mental skill utilized like in cards. But there is still an element of chance in there, since when you fail, you draw out another card and take a chance. Shaykh does not have a conclusive answer on this issue and many of the contemporary scholars have placed these games in the prohibited section (because the base of these games are on chances) and the Shaykh does not want to break away from that.

In its financial application, it is sometimes defined as “deceptive uncertainty,” indicating that the one who practices gharar deceives or defrauds through the use of uncertainty, although it is more commonly rendered as “uncertainty” only. It is also known as “speculative transaction.”

Kamali summarizes the general position on gharar in sales contracts as follows:“In a contract of sale, the word gharar often refers to uncertainty and the ignorance of one or both parties of the substance or attributes of the object of sale, or of doubt over this object’s existence at the time of sale. Gharar is, however a broad concept, and may carry different shades of meanings in different kinds of transactions.” (Kamali, Mohammad H., Islamic Commercial Law, 2000, p. 84.)


The Essence of Gharar:

Gharar Sales are of Three Kinds:

1. That which does not exist

(Which involves uncertainty over the existence, or uncertainty over possession of the subject matter)

Possession takes two forms:

a. Physical possession is evident where the seller physically possesses the object of sale.

b. Constructive possession exists where an individual does not hold an asset in his physical possession but does legally own it and is therefore responsible for the risks pertaining to that asset. Possession of an asset is normally determined to custom.

Examples:

-year contracts on crop sales.

o Crops are not allowed to be sold until they have just formed into the fruit or vegetable or grain (sprouting and almost ready, not necessarily ripening). At this stage they will be green. If they are sold in this stage they need to be harvested immediately since the price will change if they are left to become ripe. If the crop is sold just before it is about to become ripe it is allowed to delay the harvest.

Why is this haram? Because there is speculation on the price, it could lead to monopoly and instability of market! A man makes a contract with a farmer to sell him the crops. Then another man goes to the farmer to buy it but the since already sold it so he runs to the buyer and buys it for a higher price. This leads to speculation and you might get stuck paying a fixed price for a crop for a future period when it might not be stable.

Also, what if grasshoppers come and eat the crops after it ripens? Then the buyer is responsible.

are even born.

o Buying the offspring of an imported Arabian horse for two or three generations. This is haram.

What about selling eggs that haven’t hatched? It’s fine because the eggs exist.

he sea.


o In the case of commodities being on a ship, you do not physically have possession of them as yet.

o Selling an item before it is even manufactured.

o Buying banana from Sudan before the season.

Q: Sheikh, how can I make sure I have the right supplies for the right price for multiple years without falling into haram?

A: Shaykh doesn’t know a contemporary way to deal with this but you cannot buy sell/buy that which does not exist.

2. Undeliverable commodity

(Which involves uncertainty over availability of the subject matter)

Examples:

o The customer pays for fish, and they give him a fishing rod to go fish in the sea. This is not allowed since the customer paid for a fish, and he should receive a fish.

o If a person pays for the service, i.e. to go fishing for recreation, this is different and is allowed. The service being rendered here is a place for the person to fish.

o Contracting on fish is allowed as soon as the fish has been caught and in the boat.

o This is the main reason for the absurdly high prices of oil today.

o Many of these contracts have already been concluded for the next hundred years and the oil is still safely in the ground.

o It is only allowed to sell the oil when it is out of the ground and in the containers. It is now deliverable.

Anything you don’t have control over delivering, you should not be selling.

3. The Unknown

Examples:


o This is not allowed. One of the cars has to be specified.

mystery prize.

o If there is no money involved, this is allowed.

o If a person pays for the chance to win this mystery prize then this is not allowed. Note: CHANCE

Categories and Rulings of Gharar:

1. Extreme Gharar – That which overwhelms a contract so that it becomes a dominant feature

Ruling: Prohibited Unanimously.

Gambling, lottery and similar games are prohibited due to the extreme gharar they involve. - In gambling a person pays $5 for a ticket hoping to win $600 Million. There is no basis for winning other than random chance.

100% gharar.

Examples:

Mystery box on ebay.

2. Minor Gharar – That which is outweighed by a greater benefit

Ruling: Permissible unanimously

- Minor Gharar is forgiven because you cannot be 100% exact.

Examples:

o When buying a box of dates it says 2lbs on the box. However if you were to measure it with a scale you would always be off – either you will get more than 2lbs or less. This is permissible, as long as there is not a big difference between the advertised weight and the actual weight.


o When buying a dining table, one does not expect to have the bottom of the table finished. This is gharar but it is forgiven.

o A person does not usually care about the stuffing inside the furniture as long as it feels good. This again is forgiven.

3. Medium Gharar

Ruling: Disputable.

Measuring gharar is based on custom.

Examples:

rops before they show sign of maturity.

The dispute here is over the meaning of maturity of the crop. What determines the maturity of corn crops? Once the sign is seen the sale can take place. It is not allowed to sell crops while they are still blossoming.

o With Priceline you input all of the information that is relevant to your search and then the website will conduct the transaction on your behalf.

o What if you purchase an airline ticket and then find out that there are two stops on the way. This is a hardship but it still gets you where you wanted to go.

o Some scholars considered this as gharar and not allowed and others say that it is allowed because of the needs of the people.

o The gharar involved here is that you do not know how much food you will end up eating.

o Some scholars have considered this to be haram and others have allowed it.

o Sh. Yasir’s position is that it is medium gharar, but allowed. However, ‘eat responsibly’.

Other Examples of Gharar:


o Games where you play for the chance to win a prize. This is not allowed since you are actually paying for the chance to win or lose and chance is not a legitimate commodity in Islam.

o Paying to enter Six Flags or any other theme parks. This is medium gharar since you have paid for the opportunity to ride the rides. You might end up riding all of them or some of them or none at all. It is not fair that some individuals ride all of the rides and others are not able to do so. In the end, you are paying for a service that is not clearly measurable.

o A basketball tournament.

- If all the teams pay an entry fee that is collected and the total is given to the winning team, this is gambling and is haram. To remove the haram element from this scenario a team that does not pay the entry fee and should still have the opportunity to win the money.

- If the teams pay an entry fee and a portion is given as a gift to the winning team this is allowed.

o Raffles – If everyone pays to enter the raffle this is gambling. To ensure that the raffle is not a gamble, individuals who do not pay should be entered into the raffle.

Q: Can you buy an apartment that isn’t built yet but they have the land, the blueprints, resources?

A: Yes, but you can’t sell it until it is built.

The gharar is decreased by increasing the description.

Car insurance is a security contract based on gharar—how much? There is dispute. You don’t know what type of accident could happen and how much harm could happen.

Priceline: You give as much information as possible to decrease gharar. There is an element of gharar but it could be forgiven because there are a lot of details that you are putting in.

Some disputable sales due to gharar:

-juzaaf or the sale of a certain amount of quantity without being measured.

Examples:


o Buying furniture from a school auction. There are some good furniture and some bad ones but you do not know how many of each and how many in total.

o Buying in bulk from a flea market.

o Buying baskets of fruits, while you do not know how many fruits are there.

o In a department store, you see an up to 80% off sign, and the prices are all cheap and so you call the manager and ask to pay 70 dollars for all the shirts and pants that they are selling in a box. This is called Bay’ul Juzaaf (Random) and is disputable. Only acceptable with insignificant items, not gold or silver!

Ruling: Most of the scholars allow Bay’ al-Juzaaf in the insignificant amounts such as a couple baskets of fruits or a basket of individual cosmetic items. However, they do not allow this type of transaction in regards to large quantities such as the entire contents of a shipping container.

Note: Buying the contents of a storage unit, such as in the show ‘Storage Wars,’ is not Bay’ al-Juzaaf since the bidders are not even allowed to see the insides of the unit.

-urboon or the down-payment sale.

Examples:

o Renting a hall and paying 10% down payment. In the case where the use of the hall is no longer needed the 10% is lost. This transaction contains gharar because the Management of the Hall is charging you for an assumed loss of business because of your reservation.

Ruling: Many scholars including Sh. Yasser believe that this transaction is allowed.

However, this also depends on the amount of down payment involved. Unreasonably high down payments are problematic.

Examples:

o Being a broker for a company. There are two scenarios here:

receive a commission. This is called Samsarah and the one who does this is called a Simsaar and this is acceptable.


order from the company, this is Bay’ maa laa yumlak.

fully come into the possession of the seller.

Examples:

o You have ordered a shipment of Hijaab from Turkey and it is in transit to New Jersey. Selling the Hijaab with this knowledge but not having received them as of yet is Bay’ maa lam yuqbad.

Ruling: Highly disputable. It is better to ensure that they are in your possession before eliciting any sales. This is in order to prevent any problems. It is possible that customs might not accept your shipment. To avoid speculation and inflating the prices, this is prohibited.

Example: Japanese company tries to monopolize crab season, so they make a contract that you will buy all the crab you collect for a fixed price. But they don’t pay you anything until you collect the crabs and bring it back to them, and there is no minimum payment requirement. In this case, the contract is acceptable. The company paid for the exclusive rights to buy from this boat. Whatever you collect, I pay for. If you collect nothing, then I pay nothing.

But if you don’t collect anything and then they are still required to pay a minimum amount, it is haram.

Example: Non-refundable fees like housing deposits and intent to enroll deposit for schools and colleges. Is this haram? They are halal because the payment is after you are accepted.

Example: People go fruit picking. Farmers don’t charge you for entry and you can eat as much as you want. Then when you leave, they charge you for the weight of how much you are collecting. This is halal.

What if they charge you an entry fee? Yes, it’s allowed.

What about if whatever you collect, you can only take a certain amount in a particular container that you pay for. The rest of it the farmer will take it. This is child labor. This is not acceptable. Shaykh doesn’t want to prohibit the practice because they tell you up front that you can eat, have fun but when you leave, you can only take that box.


Is it permissible to say whoever collects the most gets a prize? Yes, and it’s good for competition.

You get your money back in some way, whether you sell it or they actually pay you the full amount. Once the money is paid back, you have to return the rahn.

However, you can neither wear the bracelet nor can you drive the car that you have from rahn, but you will remain responsible for the maintenance of the items.

As a lender, you have the right to ask for a rahn, but you are not allowed to benefit from it. What if the rahn is a cow? The feeding is the responsibility of the borrower and the milk belongs to the borrower. But if the lender is feeding it, then he can use the milk.

-Baqarah, it says “if you were traveling [on safar], and you want to do transactions, then take a rahn until you come back.”

Kafalah (Guarantee):

o Warranties are considered a Kafalah.

o There is a limit of gharar because you do not know exactly what will happen to the product. Contemporary scholars said that if the retailer or the manufacturer of the product is the one doing the warranty, then this kafalah is permissible. If it is from a third party, then you are not allowed to buy it, because they are gambling on your purchase from the retailer.

Shaykh Yasser’s advice: do not co-sign for a random person on the street.

o A co-signer is also considered a guarantee or a kafil. The reason for this is because if one person does not pay then the other is guaranteed to pay.

This is an act of charity so the kafil cannot be paid for it.

Shuf’ah (Pre-emption):

o Exclusively for real estate.

o To remove hardship. Removing hardship is the main principle of Islam.

o So when you sell anything, you should see if anyone (who is attached to this piece of land) is able to buy it. If they cannot then you are allowed to sell to others.

Example: If you want to sell your house, you are required to, first and foremost inform all your neighbors that you are selling.


o This contract is ONLY on non-movable items.

Wakalah (Agent on behalf of an investor or partnership, protector):

o Al wakalah comes in two parts:

Full wakalah: giving the person full power of attorney searching and making the deal.

Partial wakalah: giving the person a limit to doing the search but not making the deal.

Also, you should be careful if you are sending someone overseas to look for a spouse for you by making sure that you do not give them power to actually sign on the marriage contract.

two dirhams to buy a goat. So he went to the market place and bought 2 goats for two dirhams, and then sold one of the goats for 2 dirhams. He then returned to the Prophet with 2 dirhams and a goat.

this means that the person can be paid.

Hawalah (transfer of liability for a debt):

o It is a non-binding contract.

o A debt is settled through a third person. But in this case, the debt is moved from one person to another. But no extra money is allowed to be taken because then it will be considered riba.

o The hawalah moved from one person to another.

Example: If a man is not able to pay back a loan thus, he asks that his father take care of it. The father agrees and decides to pay the loan for his son. This is halal, but it is not binding, therefore providing the dad and the person who is getting paid back with the freedom to change their minds.

Or the opposite: Someone owes you money and you want to give a gift to someone so you tell them “So-and-so owes me money so go and collect it from them.”

Questions:

Worker’s compensation is halal; if you got injured you can get the money.

Also, money from a class-action settlement is halal.

Land and good vs. bad


Girl scout cookies

Contracts of Charity:

(loan): This does not have to be money. It can be a car but you have to bring it back to the owner in the same condition you took it as. If something happens to the qard, then you must pay the price of the item.

Binding contract, you have no right to withdraw and take the gift back. The Prophet (saws) said a person that gives a gift and asks for it back. It is like a

dog that vomited and then went to back to lick it.

ld not take it. But if they insist that it would be fine to take it back. Some fuqaha said you shouldn’t take it at all and give it to someone else.

During an engagement, significant gifts like a $5k diamond ring are usually given towards the mahr. If the engagement breaks then the guy has the right to ask for all those gifts back.

Giving a gift for the sake of Allah (swt)

the sake of Allah (swt).

the ownership for the sake of Allah (swt). They cannot be resold unless they are no longer beneficial and are diminishing in value.

Example: Muslims who came here built a masjid near a factory because a large number of Muslims work there. But then, all Muslims live somewhere else, so you can sell the masjid with the condition that this money goes to another masjid.

All types of insurance are haram, except the daman al-ijitima’y (social security).

assets that is collected by investors towards the benefit of their members. It can be invested in something like the stock market, or used as a mudarabah. If someone is hurt, then they can use the money from that social security to pay for medical needs. However, the current social security policy is all based on gharar, chance.


considering coverage, you should choose the one that is not expensive.

can cover all the cases.

Question: Can you help someone else pay off their interest-based loan?

Shaykh’s advice: Don’t drink the free coffee or free snacks that banks offer. All their money is haram, so if you can leave as quickly as possible that is best. Try not to enter in the first place.

PART FIVE: The Fiqh of Modern Events (Fiqh Al’Nawazil)

Chapter 16

Introduction

The issues that have happened in recent times need the fuqaha to come to an ijtihad about the problem.

Definition:

An-Nazilah (pl. nawazil): what comes down and befalls

Technical: it is a new contemporary issue that requires a fiqh opinion based on ijtihad (reasoning).

What Are the Aspects of Nazilah?

sending a commodity through teleport?” When this happens, you can look for an answer.

It should be new and not necessarily covered by the text (some nawazil might partially be covered by the text). It should be severe and or at least has become a very common and definitely demands a fiqh decision.

It could be an issue of fiqh or a non-fiqh issue like discovering a new disease. In the case of non-fiqh nawazil, it might not require a fiqh opinion at all, unless religious consequences appear as a result of this issue.

What is the fiqh procedure in dealing with the nawazil?


To do Taswir

o For example, a person that is getting money from an ATM machine. You should start asking all the questions to help you get a mental picture of what is going on so that you can use your knowledge and come up with a solution.

ou need a very clear mental picture of what the issue is so as to find the correct fatwa.

Ashaykh ashinqeety specialized in cases regarding surgical procedures and spent 4 years in a hospital understanding from the doctors and having the ‘taswir’.

To do Takyif: to create a likeness to it in terms of what we already have mentioned in books of fiqh. Like back in the past when tobacco first came out, they didn’t know about its health effects. They only sensed the bad smell so they made it makrooh because they said it was like garlic and onions.

In summary: What is required of the fuqaha in regard to dealing with nawazil To draw a fiqh ruling that is suitable:

1. To try to find out the proper ruling to the issue, which Allah will be pleased with, to the best of their judgment.

2. To make sure it is applied properly amongst the people who are governed by this law.

Some new scholars want a ‘revival’ in the deen and we no longer adhere to the Quran and Sunnah and liberalize Islam. We have to realize that the shari’a was chosen by Allah to make our life easier. If we stray away from Islam saying that we are doing this to make the ummah’s life easier, then we are in fact getting ourselves involved in hardship. If any issue comes up with ijmaa’ and all the scholars agree on one opinion, then it becomes binding on us.

“Bidayatul Mujtahid wa nihaayatul Muqtasid”

The distinguished Jurist’s primer by Ibn Rushd.

Chapter Seventeen

What is the difference between the capitalist system and the Islamic system?


Islamic system is divinely regulated: not just because you can make profit, you do it. Also, Islamic system includes charity.

Differences:

1. In secular capitalism, the profit motive or private ownership are given unbridled power to make every changing economic decision, without control by any divine injunctions.

2. One of the most important characteristics of Islamic financing is that it is an asset-backed financing.

3. The conventional/capitalist concept of financing is that the banks and financial institutions mostly deal in money and in monetary papers.

4. Islam does not recognize money as a subject matter of trade, except in some special cases

5. Capitalist theory: The capital and entrepreneur are two separate factors of production. The capital gets interest while the entrepreneur is entitled to the profit (or loss). So the investor does not share the risk and already gets interest by virtue of giving a loan.

6. Islamic theory: does not recognize capital and entrepreneur as two separate factors of production. Every person who contributes capital (in the form of money) to a commercial enterprise assumes the risk of loss and therefore is entitled to a proportionate share in the actual profit.

Lady in Florida shot a warning shot in the air to scare away her abusive husband. Because the law is so specific, the judge had no choice but to sentence her to 20 years in prison, even though that is not true justice.

Democrats believe in a limited regulation of the market, versus republicans who believe it should be a free market with no government interference. He unfortunately said that none of these would work unless there was a “true democracy”, meaning that there should be no lobbying. The biggest lobbying in Washington is insurance. No wonder Obama keeps opposing universal health plans.

You can make life insurance against someone’s life and put yourself as the beneficiary. This is because the market demands it.

Whatever the market allows you to do, even if it is unjust. There are insurance policies that you can purchase in the case that a company

goes down. If the market demands it, then it is done. But this is not right, morally.


type of an asset.

In Dubai, they took shares from the people and invested that money in the newly built airport. If anything happens to the bank, the people still have a tangible asset.

nly function is the transfer of money from the buyer and the seller. They create a pool of money for the people that will invest. (All lending and making money off money)

The only time you can make money off of money is when you do currency exchange. However, you cannot make a living off of that. But if this is your business then it is ok.

Islamically, we are allowed to profit as much as we can, or own as much as we can. There is no limit. But there is an ethical responsibility and a legal responsibility. In a mudarabah contract, can you make the profit variable. So for the first $10,000 profit, we split 50-50 and for the profit after that is 60-40. No this is not fair. You can say that for the first 3 months, we split it 50-50. And for the rest of the year, it’s 60-40. So the fluctuation cannot happen during the same period because what if the first profit we make is 20,000? Can we split half 50-50 and the other half 60-40? No we cannot in this case. Scenario: if there is a mudarabah contract and they opened a barber shop and after three months, the investor gets back his original capital and the percentage of profit. That’s not enough. They have to liquidate the assets in the barber shop (the scissors, etc. )

Chapter 18

The Doctrine of Necessity

The concept of necessity has become so lax that we are now applying it to everything to justify our wrong doings. Now, necessity is the basis for our actions because we are a minority and need to survive.


Deciding what is or is not a necessity:

1. That which is permitted out of necessity does not become established as a norm or as a principle.

2. We must draw a distinction between a national state of extreme necessity, and one that applies to a single individual.

Unless you have a very large family of nine for example, then you can rent or find another solution. But if you really cannot find a house that fits you nor someone who will accept you to lease, then look at the options and if you find that Islamic financing and banks are both wrong, then go with what costs you the least.

Buying a house on mortgage because you have only one child and want to invest in buying a house does not constitute necessity. However, if you are a father with 5 children and there is no one willing to provide you with an apartment, then this may be classified as necessity.

The state of extreme necessity should exist in reality, not psychologically.

-pack of Budweiser Beer. You would drink enough to get you to cross the dessert. But you should know that it is a haram drink, but its availability makes it ok because of necessity.

she take off her hijab because this justifies necessity? No, because there are other alternatives such as homeschooling and private schools for Muslims. You can’t say that I won’t succeed in homeschooling or my parents are not qualified to teach me because their education is too little. Shaykh thinks this should be an incentive to make private Islamic schools.

extreme case of need. Some scholars said that it is wajib on you to eat and keep yourself alive.

people. However, if it is not, then it is a case by case scenario.

buy the worst house out there, but you shouldn’t look for the most expensive as well. Be moderate in choosing your house.


need “Muslims in them” don’t justify a need. Education can be obtained from schools that are cheaper and more affordable. They can lead to the same career. You shouldn’t pay so much in loans just because of the name of the school.

o What if you can pay off the loans in the grace period? These companies want you to do this because they know you will not be able to pay them off right away, and that way you can continue paying them back with riba.

that is necessity here is for someone who wants to build their life. However, they do not need to become doctors in order to do this.

future”

o The problem with this is that they cannot maintain it. The future needs masajid in different places, not one huge one in one place that no one attends.

It is permissible to accept that money, however, you cannot ask them to put you down as the beneficiary.

What if they ask you? It’s up to you, give them a vague answer.

o A car is a haja, (a pressing need), without it, it only makes things difficult, but you can survive without a car. Depending on where you live, a car could be a haja or a darura. In NYC, not even a haja. In some remote place with no public transportation (log cabins where bears could eat you and no one there) a car could be a darura. Shaykh told the story of a man who never bought

o Having a job and earning a living is a darura (a life threatening necessity).

o The scholars said “A pressing need can mount to the level of darura.”

o With health insurance is based on chance, and they rip you off. A body guard is there to protect you from getting harmed in some way.

Chapter 19


Credit Cards (biṭāqāt’l-i’timān aw biṭāqāt’l-iqrāḍ)

Even the title that was given is deceiving. Does it mean that we owe them or they owe you? It basically comes down to our right to borrow money and owe them...

The main principle of the credit system:

The assumption of a financial trustworthiness of the borrower (debtor) (amānat’l-muqtariḍ)

The ability of the debtor to pay the debt back in a timely manner (al-wafā’u bi’l-dayn mu’ajjala)

Which make up your credit score. So no one will give you a loan if they don’t trust you.

Let’s try to picture it: When you slide a credit card, you are borrowing money from Chase of BOA or whatever bank and using it to pay for your items.

If you use a debit card, you are paying from your own money so transferring liability so hawalah.

If you use a gift card for a particular store, then you are settling a debt. The store owes you $50 and the item is $35 so now they owe you $15.

If you use a visa card, it’s hawalah and you are using money that you own now (given to you as gift for example)

Al-takhrīj’l-fiqhi (the juristic understanding) of the credit card system:

The contract for a credit card has a clause in it that says if you pay late, then you have to pay interest. So signing on this contract is haram. Never sign a contract for a credit card. But for some people, it is a need. A credit card is a need depending on situation, like for someone who is always traveling.

1. They pay in full every month 2. They do all the necessary measures not to overdraft.

What if someone unfortunately gets charged riba as a mistake? He should take every possible step to avoid paying that interest. Call the company and ask them to take the riba off the statement.

Is it halal to pay the annual membership fee for using a credit card? Yes, insha-Allah, because you are paying for a service.


The nature of the different contracts resulting from getting different parties involved in using a credit card:

Between the source of the card or the issuer (ex: a bank, Visa Card) and the carrier (example: the customer, whether an individual or an entity)

1. Kafālah (suretyship) So when you slide your card, the bank is now a co-signer and vouching for you. You cannot pay for kafalah.

2. Wakāla (agency, representation) The bank is acting on your behalf and they can collect money from you for this.

3. Qarḍ (loaning): Between the source of the card and the merchant (example: department store)

4. Samsara (brokerage): Between the carrier of the card and the merchant. They facilitate the sale and get a commission because they put their logo to help you get a better deal. Dispute about if it’s kafalah or wakalah, so dispute about if they can charge you or not.

5. Ḥawālah or Ḥiwālah (transfer of a claim) 6. Bay’ (sale) or ijārah (hiring or rent)

Classify a transaction (based on page 58) that you do with your credit card

What are these transactions could be and if there are any fees what could they be? (We have 3 different relations)

Remember there are three relations here.

1. From you, the cardholder, to the bank When you slide your card in a store,

o What’s Hawalah? Basically, it is when you transfer liability from one side to another side. Is there any transfer of liability here?

o No! There’s no transfer of liability here. Over here, Hawalah doesn’t happen between you and the bank! Hawalah would come in when you charge the card at the store. So it becomes the relationship between you and the merchant. The card, itself, is used as the Hawalah contract.

o You tell the merchant, I am buying this, but I’m transferring my liability for payment to the bank- someone who’s rich who can pay you.

o So between you and the bank what would it be?


o Is it Qard? Are you taking a loan from the bank? Yes, you are, because when you pay, you are not using your money, but you are using the bank’s.

o When you take a loan, all the principles of loans need to be taken in consideration, like riba, late fees, interest, delays, deferrals, etc.

o Is it Kafalah? Can be also. The bank becomes like the kafil (the guarantor), who guarantees on behalf of the cardholder that payment will be made to the merchant. The bank can be considered as a cosigner to the cardholder. Ex. Last 4 digits of the card that appears on the receipt that you sign serves as the banks signature.

o If it is Kafalah, is the bank/ the cosigner allowed to charge you money for the service thto be an Act of Charity.

o Can it be Wakalah? Representation? Not really. Some say, yes, because you go as the representative of the bank, which is why the banks collect the money, because you were representing them on their behalf. However that was defeated by the argument, that you are not buying on behalf of the bank, but you are buying for yourself. And the bank just guarantees that you are going to pay them back.

o To clarify, it cannot be Wakalah from you, the cardholder, to the bank. You cannot be the bank’s agent. But it can be Wakalah from the opposite site. The bank acts as an agent on behalf of you, the cardholder. When you charge your card, you are asking the bank to go and cover your charges. If it is Wakalah, is the bank / agent allowed to charge you money for the service they are providing for you?

o Yes, you are allowed to pay money to an agent (Wakil) for their services. Ex. So that is why they allow the bank to cut a percentage, which would be in form of membership fees as the Wakalah, because the bank is acting as your Wakil, your agent.

o Samsara (broker) - The broker attracts more customers on someone’s behalf. You, the cardholder, is like the broker who gets the bank more customers.

o Ex. The banks send machines to these stores. Then the store puts up a sticker indicating they accept Visa. The stores got these machines in order to serve customers, like you, who may use Visa. You served as a broker who led these stores to purchase from the banks.

2. From you, the cardholder, to the merchant o *You took that card, sign into machine, merchant takes our receipt and you sign it.*


What transaction happened? Hawalah.

o When you sign, it is not regular Bai’ (trading and selling).

o If it not, you need to observe if you are buying something that they own, something deliverable, Halaal, buying something existing, something in their position, etc..

o Some Ulema say it’s considered Hawalah. “I am just signing this for you, I have a cosigner, he is the wealthy person. I am sending you over to collect the money from them.”

o In agency (Waqalah) relationships, you are allowed to take money for service, but not for Hawalah.

o You are allowed to take money from agency but not from Hawalah

3. From the merchant to the bank

o What would be the relationship between the bank and the merchant when there is a cut?

o Umulah (commission): We would consider this as Umulah. The banks bring the merchant customers, so they want their commission.

o Ex. The bank to merchant: “I will put my logo (Visa) on your door and that will attract my customers to come and buy from you. They will swipe using my card, with my name, so I want my cut from it.”

o If you agree to the Umulah, the banks take a cut from whatever the customers actually pay. So, that’s how they justify the percentage they cut from every sale that happens in the store of that merchant.

*So there are many different interpretations to the relationship to the bank and the cardholder. These are as mentioned on page 65.

Musalahah (Preventive Conciliation) with the creditor. It is not riba to begin with because riba entails growth, and this percentage is deduction.

o Ex. The bank owns, you, the merchant, some money. And you say “You don’t need to owe me the $100, you give me $98 and I’m happy.” Is this riba? No. But it would be if bank pays you extra.

o How do you reconcile? Now that the bank owns the merchant, the merchant has the right to drop some of his Haqq so he can get the cash fast and as soon as possible. And,


if the bank offers to pay $98 and the merchant accepts, this is okay too. That’s why it’s called reconciliation.

Signing a contract that stipulates riba as part of the transaction.

o Are you allowed to sign a contract stipulating riba even if you are not going to be paying riba? The Ulema have two opinions:

1) It is absolutely prohibited the condition included entails the approval of haraam, and any contract that is based on haraam is null.

o (There is no such thing as necessity for using credit cards.) If you are going to have to use credit card, just use your debit card and that will be it.

2) It is permissible because it alleviates a pressing need (haajah) or necessity (darurah). It is permissible with the condition that in order to avoid riba, monthly, payments should be paid in full.

o It is a pressing need which can rise up and become tantamount to a necessity. So, it is okay to do so with the condition that you pay in full (not just the minimum) and you avoid the late payment fees.

o It is not to say that it is 100% halaal, as much as it is for allowing this practice for the necessity of using that credit card.

o Where do we get that this is permission from? From the Story of Bareerah and Mugeeth. One day Aisha purchased a female slave. Her name was Bareerah and her husband was Mugeeth. In the contract with the previous owners, they stipulated that they would sell Bareerah to her with one condition- that if she ever freed her, they would take Bareerah’s loyalty.

that slave ever dies, the former owner can inherit money from the slave. If there’s a need to pay blood money, he can participate as part of that alliance.

y, loyalty goes to whoever frees the slave. Aisha wanted to free Bareerah, but was worried about the stipulation. She came to the Prophet with this concern. Tell, them “[Fine, because Walaa is automatically given to person who gives freedom to the slave.]” Meaning: Even though the condition is put on you, fine, give it to them, because when you free them, loyalty becomes automatic to you. It doesn’t matter if it is a condition or not.


o sign it based on that necessity, that (fasiq) condition will be considered nullified, and the contract legitimate.

Penalties and Late Fees

By a unanimous agreement these late fees are the pure riba.

o Riba Jahiliya (the original riba) – When the loan matures, and you didn’t pay in full, Extension is given, but you have to pay extra money. That is exactly what late payments fees are.

How to avoid the issue of charging late fees? And taking account of the cardholder who neglects payment?

Offering a grace period to pay Cancelation of membership and collecting fund through litigation. Reporting the debtor to the national credit system and considering the credit

score as a measure of financial trustworthiness. Put restriction on business practices, which forces a person to keep track of

records good and sound. Do not charge a late fee to your customers. Report to a collection agency (who

becomes your agent/ Wakīl), that you employ, and they get a cut from the money they collect for you. The collection agency has their way of getting the customers to pay. They can even get their hands on their assets. Either, cardholder will pay. Or, they can come to reconciliation.

this a complete-debt transaction that they are better off to take 1500 than nothing, the bank takes the $1500 and still pursues the remaining 1500, until the debt is paid in full.

keep it open to everybody, it will be difficult to track all these default contracts.

credit card to just anybody, as we commonly done in America (even to students- who will be enslaved to pay these debts).

In the current credit card system, penalties are considered riba (all scholars agree). How do we solve it/ keep cardholder in check? We don’t have the Islamic system yet. Are the suggested solutions above practical? It has to be tested in the real world.


(Membership fees are considered permissible, since bank is acting as agent and managing money)

Is it permissible to use a credit card to buy gold or silver?

Gold and silver transactions must always be performed munājazah (full payment and exchange of commodities at the time of the transaction). This sale is called ṣarf.

Using a credit card to pay for a sale made with a different currency (ṣarf).

The credit card reward system

Example: Buying commodities at a foreign import/Airline Mileage

o If they offer cash-back, avoid it. Shaykh is not comfortable with the cash-back system, not because of the contract, but because the source of the money is haram.

o If they offer points, don’t use points on food/drink/clothes, but use on services, like airline tickets, rental cars, hotels, and recreation.

Is it halal to get interest on your security deposit? As a tenant, by law, you have to sign on a contract that gives you this percentage. Shaykh is not sure and thinks the matter should be studies further.

Chapter 20

The Loaning System

Buying a house by using a conventional mortgage.

How does the mortgage system work? When you buy a house from the bank, this is called a mortgage. How does the bank deal with it?

1) You build the house through the bank

2) Or the bank buys a house for you that already exists.

back with interest.

Two Opinions:

(1) The default ruling is prohibition because it is based on pure riba:

Taking a mortgage from a conventional bank is considered riba


(This is by unanimous agreement (conservative, vast majority), even those who say it’s okay to take your house on mortgage the first time you buy- the only reason they allow it is because of necessity/pressing need).

(2) It is permissible to buy the first house on mortgage, out of necessity (ḍarūrah) or pressing need (ḥājah) for the following reasons:

ārah (renting) because it would cost

much more than buying the house. The individual does not have the cash

money to pay.

-by-case scenario and

those with specific conditions.

al-ḥarbi (with whom the state is

at war with his/her land) as long as it is done in their land.

o al-ḥarbi : is a non-Muslim who lives in the land of the enemy

o If you go to the land of al-ḥarb (ex. the Muslims are at war with a specific

nation- the merchant goes there after a truce / peace treaty is achieved), it

is permissible to trade dirham for dirhamain (1 dirham for 2 dirhams).

ndition that there is mutual consent- they are okay with that

o Rough translation “[If a Muslim enters the land of the enemy during a time of peace or truce, and (he deals with them in Riba) trading one dirham for two dirham, there will be nothing wrong with it, because the rules of Muslims do not apply to them. If he takes their money in any way, with mutual consent, than it is permissible].”

o Sheikh Mustafa Al-Zurta, a Hanifi scholar from Syria said: “[It is permissible to take a loan from the bank with interest that is deferred for the reason of buying a house that will end in a contract that you will own the house and it will come into your possession-


As long as you pay the principle with the interest. with the condition that what you pay on monthly payments is not more than the rental price for the same property in that market.

o Ex. If rental is $3000, and if you buying it is $2000, then it is okay, but if you are going to buying for $3000 when the rental is only $1500, it is not okay.

ught to establish themselves in the land where they reside, and they should not allow their wealth be consumed by rent or lease.

the suffering of the people.

Al-takhrīj’l-fiqhi to this issue (There are issues with the above explanation):

ām Abu Ḥanīfah raḥīmahullah. (Who is earning the money?)

o Allowed to earn riba as long as you are the one profiting, but when you buy a house on mortgage, who is the one who is profiting? The bank!

o The majority does not agree with this opinion, because riba is riba, whether you are taking it from a Muslim or a non-Muslim and they argue that this was a completely irresponsible fatwa.

The controversial dichotomy of the land of war (dār’l-ḥarb) and the land of peace (dār’lislām).

(Does any one dare openly call the land where they live dār’l-ḥarb?) Although, there may be wars in Muslims lands, can you call the land you live in

dār’l-ḥarb, even though, you are a citizen of that land? If so, what are you doing here? Islamically, you cannot live in dār’l-ḥarb. Therefore, this is a defeated point.

We call this ‘arḍAllah al-wasi’a (The Land of Allah- it’s spacious, it’s everything, it’s my hometown). It’s simply dār’l-dhimma (non-Muslim land)

Applying the rule of sadd’l-dharā’i’ (blocking the means to evil).

Explaining the legal definition of necessity and pressing need.

o This opinion dangerous, because once you open the door, it starts flooding. Everyone will start taking justifications for their first car, first bike, first boat, etc… That is why they need to block it.

How To Make A Halaal Justification To A Haraam System That Exists In This Context:


o This is basically what we’re doing with these situations, and how easy is it? Not so much. That’s why we have multiple opinions. Justifications are given by contemporary scholars.

until it charges interest to your account. In this case, it is okay to do that, otherwise, stay away from it.

Permissible Alternatives:

of money offered by local buyers to share the expenses of buying houses, and they take turns by drawing lots to determine who collects the money for the particular year.

o Ex. 10 young families come together and collect about $10-15,000, so they have about a quarter-million dollars by the end of the year. They will take the money and buy a house in cash. Problem with this system: some families are going to have to wait 10 years. (Those who received their houses must still give their house.) Unless, they raise the shares to say $25,000 (raising the number of people will make the line longer) and/ or collect every 6 months. How do we know if they will be able to raise enough money? If they are paying rent as much, in this case they can’t.

o Young professionals can get together.

o Money-management is key.

o There has to be a serious contract with a lawyer involved.

o Extra Administrative fees- If they want to hire somebody to manage their pool of money for them. Fee should be administered equally among participants. One of the participants can manage it, but he should do so voluntarily, though he is allowed to be paid for his services.

together and striking deals with a local bank to buy foreclosed houses or stipulate a Sharī’ah compliant contract.

o Back in 2009, an Imam called up Sheikh Yaser Birjas, and asked him if they could do anything with the real estate sector right now, since this is the best time for Muslims to come in and buy houses. Most Muslims who don’t deal in riba have good credit. And many houses have been going on foreclosure.


e Muslim community should get together, look into the foreclosure list, and find as many as houses, either for personal profit or investment.

They should then go altogether, collect the money and then go to the bank.

-20 buyers.

So you are talking about a few millions of dollars in cash coming to the bank.

just sitting there with an uncertain future.

seen with experience.

they are willing to secure a deal with the local community.

-ajal) deferred payments.

o When you buy the house or build the house with deferred payment (You have the land, but not the money to build house)

o Ex. In this case, if you deal with builder directly, and you pay him back in installments. It costs the builder $200,000 to build the home. Initially, the deal was the builder would build the house for you for $300,000. You agree, but say you’ll pay back over 15 years.

it costs him less to build. But, he is also taking a risk for losing because by the time he starts building, material prices could go up, and, thus, he won’t be getting the same profit margin he hoped for.

Building the house on installments from the builder directly, without involving a third party, is permissible.

What if the builder took the contract between you two and sold it to the bank/ another company? Is this permissible?

ebt.

the bank? You have no contract between you and the bank. Your contract was between you and the builder. And so your liability lies toward the builder, NOT the bank. You


made your end of the deal halāl. The transaction between the builder and the bank is not your problem.

builder and then you give permission to the builder to sell it to the bank afterwards. This is not permissible.

o Buying a house on installments from the original owner, even if it was the bank, after locking the final price.

o If it is sold by owner, that is the BEST WAY to buy.

o Ex. You are buying a house. An owner says he wants $300,000 in cash. You say you can pay $50,000 down-payment, if you allowed me to take this house in installments. You agree to pay for 10 years until payment is completed.

o Is it allowed? Although disputable, majority of scholars say it is permissible, since there is no third party who is profiting from the chance of losing/ profit and all the money is goes straight to the assets (the principle).

Question and Answer

o Can the builder sell your debt without your knowledge? It happens in all real-estate companies. Banks sold your contract right after you sign it, because they don’t want assets in hand, they want fluid cash (even if debt).

o Once you sign contract of loan of $250,000 with the bank that amount is multiplied 9x.

o They sell a contract for a million dollars into the market based on the contract with you. People buy it, and it is then ripped up in into shares owned by different people in the stock market.

o Ownership of your contract becomes divided among millions of people. Even though you still pay back money to bank assuming you are paying off your debt, while the bank owes money to other people.

o You are advised against paying student loans as mahr (dowry)

o Shaikh Muhammad Taqi Usmani –People try to cite his fatwa as the source of permissible riba in the West- Disclaimer from him on his website: issued this fatwa 15 years ago to a particular financial institution in Kuwait. He said he hasn’t endorsed any other company or contract in the world (Not even Guidance Financial, or La Riba).


āl and permissible.

Other Form of Loans- (Why would people want to take out a loan?):

Student Loans

Video Break on Student Loans

Suze Orman's Student Debt Warning w/M Moore's Response

http://www.youtube.com/watch?v=sswizmHvz1I

Student loan debt is the only debt in 99.999% of the cases cannot be discharged in bankruptcy.

Public loans are not enough to cover tuition, so students get out private loans from the bank, which can have from 15-19% interest.

The bankruptcy laws protect the banks and their rights and do not give students a

‘forbearance’ where you don’t have to pay it right away and later pay it at a huuuge interest rate. 50,000 and then 80,000 and then 150,000 and after that they will not let you get away with it. They will come after your assets and force you to pay it. A student died and they went after the grieving family trying to take their home. System allows you to defer your student loans. Interest continues to pile up, and this thrills the banks, because this is how they make more money off of money. How is an expensive education going to get you a job, when there are not jobs to be gotten?

may be a pressing need. If you need an expensive education, why not start with taking an easier education, and sponsor yourself later after you start working.

who owe large amounts of money are not legal recipients of Zakat because they are in debt by choice (that is, further, based on luxury, and not necessity).

Business Loans

Personal Loans


Chapter 21

Rent (or Lease) to Own Contract (al-ījār’l-muntahi bi’l-tamlīk)

The main thing about rent-to-own contract is that it is considered to be two types of contracts in one.

How does it work?

Definition:

An arrangement between a consumer and a seller that allows the consumer to rent homes, furniture, appliances and other goods for a defined period of time. The consumer is only responsible for paying the periodic rental fee, which is usually above the market value, for that defined time, which can be as short as a week or a month, but may be continued if the consumer chooses to renew it. However, a condition or a promise in the rental agreement provides the consumer with an opportunity to purchase the rented goods by continuing to pay the rental fee for a length of time or by paying a lump sum payment.

o Ex. You find a house you want to buy. You go to a bank and ask them to go in a partnership with you, because you do not have enough money now. The bank buys the house for $300,000. Since you are partners, the bank pays $280,000, while you pay $20,000 down-payment. So far, that much is yours in terms of the ratio out of 300,000.

o Now, as partners, you pay rent to the bank. How much is the rent? The average rental for that type of house in the market is, for example, $3000. The $3000 is divided between the 2 parties in partnership: part of it goes towards buying the house and increasing your ratio of ownership. And the other part is taken by the bank to cover their expenses. So over the long term, you will be paying more than $280,000.

o So say rent is $3000, and the house is $300,000. So for every monthly payment, how much is going into increasing you share in the house? As much as given in terms of ratio.

o The Math: You owe 20,000/300,000. So your share increases every month by $200/ 3000 of the rent that you pay.

o $200 goes towards raising your share in the house. In response, the share of the bank also goes down. Ratio that belongs to the bank keeps going down, until you pay in full.


On a monthly basis, say if paid off over 15-30 years, you are going to pay the bank more than $300,000. For example, $100,000 more.

How does it work with real estate?

The first opinion: It is prohibited

The second opinion: It is permissible

In a lease option, you rent a property at a cost slightly above market rate. Prior to moving in, you agree with the seller on a potential purchase date and purchase price for the home (which could be as low as zero, i.e. receiving it as a gift). You may buy the property at any point during the rental period up until the lease option expires. The lease option period can be any length of time that you and the seller agree to, ranging from several months to several years.

If you do purchase the property, the seller will credit part of your rent back to you, usually more than the portion of your rent that was above market rate. You can put this money toward a down payment and closing costs, or keep it. The purpose of the above-market rent is to give the seller an incentive to complete the transaction.

If you do not purchase the property, all the rent you paid remains with the seller, giving the seller an incentive for taking the property off the market during the time you were renting it.

It’s a confusing contract. It has 2 contracts in one deal. It is a sale and rent at the same time.

Sale doesn’t take place until you secure rent contract. The rent contract was a condition for the sale contract. Majority say it is not halaal and that it is a modification for conventional lease system with a twist on it.

Consider price of house over time, whether it increases or decreases. If buyer wants to sell house over 5 years time, and the value went down, who faces the loss? Only the buyer/ owner.

Current companies, like LaRiba and Guidance Financial, don’t share loss with you. So, how is it a partnership!?

Further, it is the buyer who is responsible for the taxes, even though he does not have it in full possession, yet.

Possible solution: Company should raise the rent so it includes the taxes. Otherwise, it’s not a partnership.


Another issue is insurance. The house has to be insured. It is the buyer who pays for the insurance. If it’s a true partnership, the company also has to share part of the expenses.

Maintenance: Again, it is thrown on the buyer. You cannot tell if it is a pure sale or a pure lease. Most things in the market are not %100-riba free. Ex. Devon Bank is the only bank that acquires the house and owns it before it

starts selling it to you. But when they own it, do they transfer the title to you? Or when they buy it, is the title transferred to them before they sell it back to you? Or will it be in limbo until it is sold to you?

It is not clear. But if they transfer ownership to themselves first and then they sell it back to you, that is okay.

There has to be a legal transfer of ownership. Doesn’t have to have your name of it, but you have to have legal possession of the property.

The real estate market allows you to delay registration of the house for 30-60 days.

Within those 30-60 days, you are allowed to resell house without paying taxes on it.

Another question regarding Devon Bank. If you decide to back off the deal, will there be any liability? The only liability is to pay back expenses they have spent based on your request of inquiring about the property. In this case, you owe them that money. But if they insist you become liable for the entire purchase, it becomes the same problem as earlier that the condition upon which the bank bought the property was that you promised to buy the property. This is problematic. There should be no obligation on you to buy it from them once they buy it. If there is no obligation and you back off and they won’t sue you, then this will be permissible.

Another problem is that you sign the promise contract. A promise contract is not binding.. So in order to match the banks and their mortgage system, they don’t write ‘promise’. They re-write it in a language almost the same as interest-based contracts that is equivalent in conventional banking system to any other contract.

It should be okay, if there is a 1) secure transfer of ownership to the bank first and 2) if there is no obligation of buying it after transfer

Does the bank act as an agent on your behalf who looks for the house for you and buys it for you? It is not the function of a bank, it is the function of investment companies, which actually own the property they want to sell.


Investment houses are not so popular in America because if they exist they’ll ruin a lot of banks.

There are two opinions in regard to the permissibility of this contract:

1) The first opinion: It is prohibited, for the following reasons: Giving a “promise to purchase” (alwa’du bi’l-shirā) agreement the power of a legally binding contract (by mandating legal ramification in case the consumer backs off) is not acceptable. In fiqh, a promise is only binding on moral basis not on juridical or legal basis.

Biggest issue: 2-in-1 contract. Cannot recognize sale from rental. Issue of having a condition that the partner promises to buy the house and make

that promise bonding, when a promise in Islam is not necessarily a binding contract between 2 parties.

The issue of selling at the end of the lease is confusing because sale has to be concluded at time of the contract. But in lease-to-own contract they don’t conclude sale until the end of the rental term. Islamically, you cannot make a contract like this. So there has to be 2 different sales.

Islamic ‘alternatives’ claim to be 100% Sharia-compliant then try to compete. They can’t. They make it look like a partnership in disguise but they are not sharing in the property tax, the maintenance, or the insurance. So in reality, in Islam, this is not a partnership and is not fair and is riba.

Shaykh does not endorse any of these Islamic organizations except for Ameen Housing, because it’s literally the community pool. We need a bigger scale version of Ameen Housing.

Setting the sale contract, at the end of the lease term, as a condition to permit the lease contract makes it an invalid condition. A condition of that nature is actually invalid in a lease contract.

Setting two contradictory contracts on the same item at the same time violates the ḥadīth of the Messenger of Allāh who forbade two sales in one contract “bay’atayn fī bay’ah” (Reported by Aḥmad, Tirmidhi, al-Nasāi)

The first contract is a lease contract which gives the consumer (lessee) (al-musta’jir) the right to use the property while it is still under the ownership of the seller (Lessor) (al-mu’ajjir). While the second contract is a deferred sale contract on that exact same property which entails the transfer of ownership of the property to the buyer (lessee in the case) but the transfer of ownership does not take place until the lease ends first.


This makes the contract unclear as to what exactly is the type of transaction taking place.

In a lease contract the lesser is the guarantor (ḍāmin) and responsible for the overall insurance, maintenance and condition of the property against any damage except for what is customary known to be the lessee’s responsibility. But in this contract, the lesser stipulates this responsibility be carried out by the lessee because he is considered the actual owner of the property at the end of the contract.

In the rent to own contract, the lesser does not own the property which rents out to the lesser until the lessee submits his request to the lessor to buy it first and then rent it out to him. In this case the sale is a form of selling or renting that which the lessor does not own.

2) The second opinion: It is permissible for the following reasons:

The promise is considered binding if it was initiated as a stipulation, this is according to Imām Abu Ḥanaīfah.

o If financial expenses were incurred because of that promise, that promise then becomes binding. According to Imām Malik, the promise is binding either way. Example: The lessor says, “I promise to sell you the house if you fulfill all the lease installments.” In this case, if the lessee fulfills all the payments, the promise then becomes binding if the lessee desires to purchase the property.

The promise becomes also legally binding according to Imām Mālik if it results in bearing financial responsibility by one of the contracting parties based on that promise. And in this case the lessee has accepted the overpriced rent, which he wouldn’t accept otherwise, for the purpose of fulfilling the promise to purchase the property at the end of the lease agreement.

The issue of “two sales in one contract” does not apply to this contract because the two contracts take place at two different times. The lease is at the beginning of the lease agreement and the sale is deferred to the end with only an advanced promise to fulfill the second agreement.

o It is the timing that is the problem itself!

The controversy over who is the guarantor against damage can be solved by adding the extra amount (example: insurance) to the rent and then the leaser takes care of it.

In regard to the case of “renting that which you don’t own”, if the leaser promises to enter the lease contract, then the leaser, independently (without the leaser being part of


the purchase deal) buys the property, the leaser now owns its title, the lease contract then becomes binding on the leaser, because of the promise given prior to that purchase. This is according to what was explained in the opinion of Imām Abu Ḥanīfah and Imām Mālik in regard to the ruling of a promise that results in a financial obligation.

Discussion:

If you are going to buy a house, what is the best way to buy a house without the trouble of going through riba?

Things discussed:

Partner with people, get together, and create a pool. And taking turns and deciding who is going to get the money every 6 months/

year. Ex. To pool with other people and then buy an apartment building. To buy from something that says “For Sale by Owner”. Ex. He is still paying his mortgage, but decides to sell the house to you in

installments. Is that permissible? The bank wouldn’t even allow it, if you still owned them that mortgage.

Save up enough money and then buy it later. Family members who get together. It gets difficult when you have multiple

people who need to be taken after. Go after homes in foreclosure- owned by banks because the houses are very

cheap. If the bank owns the house can you buy it in installments? Yes, but remember

you need to close the price and make sure that it doesn’t increase. You can possibly do this by offering to pay a hefty down payment. You should avoid paying late.

Shaykh Yaser spent 4.5 hours with the car dealership negotiating and laid down some conditions. He locked the price. Made it zero-interest with a 25% down payment. Reviewed anything with riba or extreme gharar. If you pay something high, they are willing to make concessions. If you can, offer the banks more than one person to buy houses from them. You can negotiate with these people. Further, Shaykh Yaser told them if they could do this, he could send the car dealership more customers.

o How do you penalize person who didn’t pay his debt over 5 years? Shaykh Yaser said he did not see anything reasonable on this. So it is going to be based on the trust you have with this individual.


o If the person doesn’t pay over the specific period, that means contract is terminated. You just take the house back. Sell it, and give them the excess (of what they already paid). It’s the only way to get out of that deal. But you can’t penalize them for that.

Chapter 22

Dealing with the Stock Market

What is the general principle of dealing with the stock market? The stock market is basically a huge pool of investors and different contracts of partnerships (which are either capital partnerships or silent partnerships-because you pay money and sit back at home). Make sure you observe the rules of Shari’ah.

Investment’s Three Rules:

There are three principle rules, which need to be adhered to when analyzing an investment from the standpoint of Sharī’ah permissibility:

(1) The absence of riba in the investment

(2) The potential for ‘unethical concerns’ such as gambling or tobacco in the investment mix.

(3) The nature of the contract between the parties involved and whether the substantial omissions exist which can result in a dispute between the parties.

o Avoid 4 elements for the prohibition of a contract: riba, gharar (uncertainty), ethical issues and conditions.

Shaykh refers to “House of Cards”, which is the name of a documentary. They ask Former Federal Reserve Chairman Alan Greenspan, to explain why housing market collapsed. They showed him the final products. Greenspan admits that he was puzzled by the more complex mortgage-backed securities on the market, though he had several PhD degrees in the field. He was disappointed because he was mastermind of the notion that the market regulates itself. After ruining billions of dollars of people’s lives, he apologized for it.

There are two types of stocks (ashum) in the market:

(these financial instruments are based on demand, even if unethical)

1) Common Stocks or Ordinary Stocks (sahm ‘ādi): A security that represents ownership in a corporation.


Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debt holders have been paid in full. Common Stocks given holders direct equity in the company and the right to a share of the profits.

The difference is that the average person would buy these stocks from the market right away.

2) Preferred Stocks (sahm mumayyaz):

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.

Purchased by people who understand it so much. They are given preference when it comes to dividing profit. They have Class A, Class B, Class C. So if in Class A, you get profits before Class B. Class C gets the crumbs of the profit.

If someone wants to buy in a company, they try to invest as much as they can. Because the more money you pay for that share, the higher the class will be.

Simple Layman’s terms: When you want to invest in a company, you can go for the less-risk and cheaper common stock or the preferred stock which is more expensive but you get paid first in the event of profit.

o Is this permissible? Ex. Each one pays 10,000. How do you divide profit. 10% for each one of them. Who takes priority on receiving profit? No one. If someone pays $10,000 in gold or pays first does this make a difference?

Partnership act is always equal, regardless. So you have no right to receive profit before anyone else.

The precise details as to the structure of preferred stock is specific to each corporation.

However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as “preferred shares”. In summary, Preferred Stocks is a class of ownership in a corporation with a stated dividend that must be paid before dividends to common shareholders.

Bonds (Sanadāt)


A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes along with stocks and cash equivalents.

Interest on bonds is usually paid every six months (semi-annually). The main categories of bonds are corporate bonds, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Two features of a bond (credit quality and duration) are the principal determinants of a bond’s interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond.

Corporate and municipals are typically in the three to 10-year range.

o Investments in bonds are done by the government or agencies related to the government.

o Ex. Dubai Airport- wanted investments so gave to Islamic Bank of Dubai. The Islamic Bank of Dubai opened bonds to the public and people start buying. Now they had shares with government on these investments. Bonds you can’t take profit right away. Has to be specific periods (6 months/ 1 year/ etc). Only allowed to unlock and take profit when entire period expires.

o Bonds also come in Common or Preferred, just like stocks. Priority given to those who paid more for the preferred stocks.

10 points on Hukm and Rulings

1. Buying and selling shares (common stocks) for the purpose of profiting in an existing and already operating company is permissible, as long as the company is ḥalāl, because the share in this instance represents a financial ownership in the capital of a partnership.

o You can buy since existing and already operating

2. Selling shares, for the purpose of profiting, in a new company (was just chartered and before it starts operating) is not permissible, because the sale in this case represents cash for cash.

You cannot buy stocks in a company that was recently charted before it starts operating.


Ex. group comes together to make organic dhabihah company. You invest and get 50,000 shares.

Are you allowed to sell it before it even hits the market? (like Facebook who announced it before way before it hit the market) You can’t do that!

3. It is not permissible to deal with a company that is based on ḥarām as a source of capital or profit. (ex. banks, insurance company)

4. Although the default ruling is prohibition, dealing with companies that mix ḥalāl and ḥarām dealing is based on the ratio of the ḥarām involved and type of it. (Example: 15% alcohol in a grocery store or riba in a construction company vs. 45% of selling pork or gelatin in another.)

No one can really give an accurate estimate of the ratio of ḥarām that will not allow you to participate in that company.

They cannot give you a ratio because of the levels of ḥarām. For example, 5% riba is much more dangerous than dealing with something that has 15% gelatin.

5. Blind Trade

Trading shares of companies with jahālah, i.e. without knowing what type of business it runs is not permissible.

o What is it? You look at price of shirts from company. It is very low and you realize it won’t go lower than that, and that it’s going to go up. So you start buying and buying, so then when it goes up, you start selling. You have no idea what you just bought. You are just seeking profit and you don’t know what you are buying or selling.

6. Guaranteeing profit in stock market dealings results in the prohibition of that particular transaction or stocks.

Guaranteeing profit makes it haram. Are there any stocks in the market that you can buy and cannot lose? Yes, there

is.

- government mandates that they always give them profit. For those of you who don’t know, Hedge Funds are exclusive clubs, with members having to be able to give 1 million dollars minimum in investment.

7. Preferred stocks are different types. If the stock entails guaranteed profit, or priority in dividing profits (before the holders of common stocks), or extra value for profits (over what the common stocks holders receive) or priority of assets distribution


upon liquidation then it is not permissible because it contradicts with one of the main principles of partnership which is equality in the rights of ownership in the equity.

Giving preference in terms of receiving profit, makes it haraam. You can’t buy them because you will be taking the rights (ḥaqq) of your partners who have the common shares.

8. Preferred stocks that provide voting or administrational power without guaranteeing profit or priority upon liquidation is permissible, because it is still carrying the same equal right or ownership in the equity of the business.

Some of these preferred stocks don’t give you preference in terms of dividing the profit; instead, they only give you the power of voting, administration, limitation of that business and so on. This is fine.

9. Preferred stocks become permissible if the shareholder participates in the business with his labor or expertise. In this case the extra profit is calculated for him based on the extra work they provided towards benefiting the corporation.

If you are buying shares from that same company and you are providing expertise to that company, they give you a preferred share, because you are providing service to that company/ partnership. Based on that you are allowed to take extra profit.

10. Bonds are considered another form of interest-based loans which is risk-free (of loss) and therefore are considered prohibited. If the bond involves investing in a business on the base of risk-taking principle then it is permissible.

Even though it’s coming from government, it still has the issue of riba involved.

Subject to same problems as any stock (harām practices, risk-free guarantees)

Alternative: Investment Bonds (sanadāt’l-muḍārabah aw al-muqāraḍah)

The business involving investment bonds is based on muḍāraba (sleeping partnership) in which the capital and the profit percentage is clearly stated.

Silent partnership. If it follows same exact rule of halāl muḍāraba, then it is halaal.

You buy the stocks and provide nothing. You just sit there and watch as the companies take care of this for you, just like in the case of the Dubai Airport, mentioned above.


You put your money as investor, the bank acts as an entrepreneur, and you get your money back with profits. In this case, this is considered a halāl practice as well.

The investors buys the bonds to finance the business and in return they wait until the distribution of profit due date (maturity) comes around.

The owner of these bonds can trade them in the stock market after the business has started, not before that.

A third party, the government, for instance, can guarantee the capital for the investors in case of loss in order to encourage growth in businesses, provided that the third party is not part of the initial business itself.

Preferred bonds are not permissible in this scenario because it violates the rule of equality in partnership, unless the bondholders contributing to the corporation through labor or expertise.

Zakāt on Stocks

o How can we pay Zakāt on this money?

o Ex. You are participating in the stock market. You have very high investments valued at $400,000. How do you pay Zakāt on this money? There are 2 kinds of stocks/ shares. Depends on the kind of share.

The corporation should calculate and pay the annual zakāt on behalf of the shareholders. Because the company, in this regard, is one entity and act as an agent for the shareholders.

o If you have an Islamic company on your behalf, you do not need to worry about it. Otherwise, you are responsible for it.

If the corporation did not pay the zakāt on behalf of the shareholders, then each investor is responsible to calculate his/ her zakāt as follows:

2 kinds of shares

1) If the stocks were used for quick profit by buying and holding them for a short period of time and then selling them again, then they would be treated as a commodity. The zakāt in this case, after the passing of one year, is 2.5% of the market value of the stocks.


If you use stocks as commodities (you buy and sell them immediately), and that’s your business on a daily basis, then you pay the zakāt at the end of the year based on their market value.

So if there is $400,000 you are trading with, you pay 2.5% of that as zakāt.

2) If the stocks were used for a long-term investment (Example: a permanent shareholder of a particular corporation) or as investment bonds, then the zakāt would be 2.5% on the profit only after the passing of one whole year from earning the profit.

Ex. 401K. You are not dealing with the stock on a daily basis. It is sitting there for you until you retire. There is a difference of opinion, but the one that Shaykh Yaser follows the opinion that you pay Zakāt when you cash the 401K, after 10, 15, or 30 years. That’s when you pay 2.5 % zakāt for the entire amount you get. Why? Because during its stay in the market, it is an assumed value. Some of the Ulema wanted to differentiate between:

401K plan that is given to you by your company completely or if you are the one who is paying towards the 401K voluntarily versus the one that is 50/50, where the company pays an amount and you match it, or vice-versa.

zakāt on. You pay the amount of money on that which you contributed yourself to the 401k. If it’s the company’s money, it is an assumed value until you cash it.

So for some stocks, bonds, you are not allowed to cash anything until after 5 years or 10 years. The debate is do you pay zakah for 401K? Shaykh says treat it like a long-term investment and pay the zakah for the end result when you physically cash it.

Why? Because even though you have access to it, if you cash it you pay fines and taxes and penalties and such. So don’t pay zakah on how much money you have in the stock market every year. After all, you could have 5 billion dollars in the stock market and then it crashes and you lose everything. So you don’t know what you will end up with.

Why does Allah command us to pay zakah? So we can circulate our money and force us to invest it somewhere so it doesn’t stay there doing nothing. Otherwise, the money disappears.

Other Forms of Dealing with the Stock Market

o Extra kind of stocks built in the stock market

Mutual Funds:


An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives states in its prospectus.

Hedge Funds:

An aggressively managed portfolio of investment that used advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).

Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment.

Investments in hedge funds are illiquid, as they often require investors keep their money in the fund for at least one year.

For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super-rich. They are similar to mutual funds in that investment are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.

Income and Growth Fund

Income Fund: A type of mutual fund that emphasizes current income, either on a monthly or quarterly basis, as opposed to capital appreciation. Such funds hold a variety of government, municipal and corporate debt obligations, preferred stock, money market instruments, and dividend-paying stocks.

Growth Fund: A diversified portfolio of stocks that has capital appreciation as its primary goal, with little or not payouts. Portfolio companies would mainly consist of companies with above average growth in earnings that reinvest their earnings into expansion, acquisitions, and/ or research and development. Investing in growth funds requires tolerance for risk and a holding period with a time horizon of five to 10 years.


When a company wants to expand and have investment from outside 401K Plans : A qualified plan established by employers to which eligible

employees may make salary deferral (salary reduction) contributions on a post-tax and/ or pretax basis. Employers offering a 401(K) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

When you apply for it, they give you 5 different options. You have to choose 3 out of 5. It’s problematic for a Muslim because you don’t know what type of dealings they have on all these options.

Try to find a halāl mutual fund who will take care of your 401K plan for you. Amanah Funds, Inc, does that. They have to abide to the law of the land. They

offer you 5 but they give you direction. Is it %100 halāl? Shaykh is not sure and needs to look at the contract.

Whenever you want to invest, even with an Islamic company, check with your Sheikh or your Imaam.

Chapter 23

Deficient Contracts

We have shown all the important contract details that need to be considered above but, in summary, we can say contemporary contracts of Sharī’ah principles typically fall in four key areas as follows:

require the householder to pay interest charges if they default on payment. Contemporary scholars have permitted Muslims to accept such contracts for essential services and goods on the basis of necessity.

so as to form a contract within a contract.

Chapter 24

Bringing Back the Barakah!

How Can We Increase Our Wealth?

How Can You Guarantee That Allah Will Bring Wealth To You?


How Can We Increase Income through Acts of Worship?

1. Thanking Allah

Allah jalla wa ‘alā states in His magnificent Book: “Remember when your Lord promised, ‘If you are thankful, I will give you more, but if you are thankless, My punishment is terrible indeed.’” (Ibrāhīm, 7)

Be Thankful to Allah and He will increase His favor upon you. This is how you increase your income.

What is the meaning of being truly thankful to Allah? Especially for those of us who see the changing seasons. It is spring. When you see things turning green around you, it is a reminder from Allah, “After every Difficulty there will be Ease”. Be grateful Allah is showing you a new season. You are moving now to the next phase.

2. Seeking Forgiveness and Repentance

Allah states that Sayyidina Nūh ‘alayhi’l-salām said to his people:

“I said: ‘Ask forgiveness of your Lord: He is ever forgiving. He will send down abundant rain from the sky for you; He will give you wealth and sons; He will provide you with gardens and rivers.’” (Nūḥ, 10-12)

This concept is also mentioned in another verse of the Qur’ān. Allah states,

“Ask Your Lord for forgiveness, then turn back to Him. He will grant you wholesome enjoyment until an appointed time and give His grace to everyone who has merit, but if you turn away, I fear you will have a torment on a terrible Day.” (Hūd, 3)

Ironically, if you seek forgiveness from Allāh regularly, Allāh in turn will send abundance upon you. He will send the rain pouring down upon you. Why is that? Back then, the source of life was agriculture. What does rain mean to people? It means harvest. It means life, food, sustenance. As a result you’ll get more money, more cash, and more children (more labor). If you seek forgiveness, Allah will provide for you and give you prosperity.

3. Tawakkul in Allāh

Sayyidina ‘Umar (raḍAllāhu ‘anhu) reported that the Prophet (ṣallallāhu ‘alayhi wa sallam) said,


“If you were to put your trust in Allāh the way that He deserves, you would be provided for as the birds are; they leave at the beginning of the day famished, and they return at the end of the day full.”

If you are truly reliant on Allāh in your affairs, he will provide you like he provides birds.

Birds don’t have a degree to get a job. They live day-to-day. Walk out of the door, saying “O Allah, I will rely on you” and you go and do your

job; Allāh will provide for you. Be content with whatever Allah has decreed because whether you realize it or

not, everything has already been written down.

4. Constantly Worshipping Allāh

Abu Hurayrah (raḍyAllāhu ‘anhu) stated the Prophet (ṣallallāhu ‘alayhi wa sallam) said,“Allāh says, ‘O Son of Ādam! Take time out to constantly worship me, I will fill your chest with richness, and remove your poverty. And if you do not do so, I will make busy your hands and will not remove your poverty.”

What kind of richness will Allah fill your heart with? Contentment Shaykh recounts story in Palestine of very poor citizens who were so poor yet so

generous. Not only that but they were content. The more money you have in this dunya, the more stress you have. So much stress to get it, so much stress to keep it.

How do you show gratitude to Allāh? By constantly worshipping Him. That’s how Allah wants you to show gratitude to Him

o There are 2 ways to show gratitude.

1. Ḥamd. You say it by tongue “Alḥamdlillah” meaning “All praise is due to Allāh. Ḥamd is always done for the good and even when something difficult happens to you.

2. Shukr

-Shukr. You are thankful to Allāh for the good, but not for the bad. For the bad, you offer Ḥamd. Thanking Allah is done with your tongue, your heart, and through your actions.

and a way of increasing your wealth.

5. Taqwa


“Allāh will find a way out for those who are mindful of Him and will provide for them from an unexpected source; Allāh will be enough for those for those who put their trust in Him. Allah achieves His purpose; Allah has set a due measure for everything.” (al-Ṭalāq, 2-3)

Those who truly fear Allah, Allah will provide an exit out of every single hardship. And He will provide for them from sources they are unaware of. Sources you have no idea where they came from. Each and every one of us probably had an experience like this with Allāh azza wa jal.

Many people believe that when Allah promises to return money to you (for every $1 you spend, you get 10-700 more), they think that the figure in their bank accounts are going to go up. Not necessarily.

Allah will put barakah (blessings) in what you already have in your hands! That will have the power of 700 times.

Ex. How many times do you go to buy something and you find it 50 % off? That’s barakah right there! (You saved 50%). Or how many times you were about to pay a heavy price when someone directed you to a cheaper resource. It comes just like that.

6. Establishing the Ties of Kinship

Abu Hurayrah (raḍyAllāhu ‘anhu) reported that the Prophet (ṣallallāhu ‘alayhi wa sallam) said, “Whoever is pleased with the fact that his rizq be increased and his life-span be extended, then let him establish the ties of kinship.”

Anyone who desires that increases his rizq and a longer life should maintain the ties of kinship (with family, cousins, uncles, parents, children)

7. Spending in the way of Allāh

Allāh ‘azza wa jall says in the Qur’ān:

“Say: My Lord gives in abundance to whichever of His servants He will, and sparingly to whichever He will; He will replace whatever you give in alms. He is the Best of Providers.” (Saba’, 39)

The Prophet (ṣallallāhu ‘alayhi wa sallam) said,“Allāh has said: ‘O son of Ādam! Spend, I will spend on you!”

Those who are afraid of giving, just give it! And Allah will give for you. Ex. At a fundraiser the Shaykh attended, 10 year old donated all her money

($200). Towards the end of the fundraiser, she won the raffle-prize- a $500


plasma T.V. This is the promise of Allah that he will double whatever you give away for his sake.

8. Marriage

Allāh ‘azza wa jall says in His Book:“Marry off the single among you and those righteous ones from your male and female slaves. If they are poor, Allāh will provide for them from His bounty: Allāh’s bounty is infinite and He is all Knowing.” (Nūr, 32)

If they were poor, Allah will provide for them. You still should have a good business plan for marriage, and find ways to be self-

supporting and wife-supporting.

9. Supporting Students of Knowledge

Anas b. Mālik (raḍyAllāhu ‘anhu) narrates, “There were two brothers (that lived) at the time of the Prophet (ṣallallāhu ‘alayhi wa sallam). One of them would come to the Prophet (ṣallallāhu ‘alayhi wa sallam) whereas the other one would seek his sustenance (by working). The one who used to seek his sustenance complained to the Prophet (ṣallallāhu ‘alayhi wa sallam) about his brother. The Prophet (ṣallallāhu ‘alayhi wa sallam) replied, (la’allaka turzaqa bihi) “It is possible that you are provided your rizq because of him!”

Giving those who are learning for the sake of Allah. Providing for someone to become a scholar, imagine how Allah will return it back to you. This doesn’t mean a person quits his job and jeopardizing his life and his family. You have to have a business plan and then put your trust in Allah, even if it was for the sake of Allah and for the purpose of seeking knowledge.

10. Making the Hereafter One’s Key Objective

On the authority of Anas b. Mālik (raḍyAllāhu ‘anhu) who said that the Prophet

(ṣallallāhu ‘alayhi wa sallam) said:

“Whoever made the Hereafter his goal, Allāh will place His richness in his heart, gather his affairs for him, and the world will come to him defeated. But whoever puts this world a his goal, then Allāh will place poverty right before his very eyes, divide his affairs for him, and nothing will come to him of this world except that which was already written for him.”

Abu Umamah reported the Prophet (ṣallallāhu ‘alayhi wa sallam) said:


“O Mankind! Jibrīl has whispered in my soul that no person shall die until his time be complete, and his sustenance be finished. So have taqwa of Allāh, and seek your sustenance in a beautiful manner. And let not any of you- when his sustenance appears to be delayed in arriving- try to seek it through disobeying Allāh! For verily, what Allāh has (with Him) can never be obtained except through obedience to Him.” Abu Nu’aym

Closing remarks by the Shaykh Yaser Birjas:

“Know my dear brothers and sisters, that if you chase the Dunya, it keeps running away farther and farther from you. If you keep chasing the Dunya. It is an illusion. It is a mirage that you will never be able to capture. And if you leave the Dunya and start running away from it, Allah will make the Dunya run after you. Allah, subhana wa’ala will send the Dunya towards your feet. That doesn’t mean you don’t become an entrepreneur. There is a difference between someone who plans and balances his dunya with the akhira than someone who puts the akhirah behind his back. Even if the latter becomes rich, he will always be poor. Why? Because he won’t be content even if he is a millionaire and he will constantly be looking for more. He will have the money but not the contentment in his heart. Arab proverb:

‘If you have this contentment in your heart, then you and the One who owns this whole universe, you both are equal. The One who owns the universe is happy with it, and you who has these pennies are happy with. So you both are equal.

Whatever you do with your money, think about whether it is halaal or haraam.

The nature of knowledge is that it produces more questions than giving you answers.

Hope you have instruments and tools that will help you find your way through these transactions.

You will have a responsibility on yourself and your family to educate them.

I ask Allah to provide for you from the blessings of the Dunya.

And I ask Allāh to provide for you from the halāl sources.

And I ask Allāh to make all your incomes in this dunya halāl.

And that your abode will be Jannatul Firdous.

And I ask Allāh to provide for us from the riches of the world in a way that pleases Him.

And we ask Allāh to keep us away from anything that is harām.


“Oh Allah! Make useful for me what you have taught me and teach me knowledge that will be useful to me.”

And always Recite:

"O Allah, save me from harām and make the halāl sufficient and by your boon/favour make me independent from others".

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Fiqh of Money & Transactions (Pure Paisa)

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