AHMAD KAMAL BIN ROSLAN

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• AHMAD KAMAL BIN ROSLAN
• 2009658166
• SHAZANAH BT SARWAR KHAN
• 2009826226

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QUESTION 12

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

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RIBA

• 2) increase in loan transactions
• Abu Bakar Jassas
• It is a loan given with stipulated increase on
  the principle payable by the loance

• DEFINITION -
• Literally - increase, addition, and augmentation
• Technically
• 1) increase in trade transactions
• Muhammad Ala Thanwi
• An increase without any corresponding
  consideration which has been stipulated in favour
  of one of the two parties in a contract of
  exchange

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

• From Jabir (Gbpwh)
• the prophet (pbuh) cursed the receiver and the
  payer of interest , the one who records it and
  the witnesses to the transaction and said they
  are all alike in guilt
• From Anas ibn Malik (Gbpwh)
• The prophet said when one of you grants a
  loan and the borrower offers him 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 previously accustomed
  to exchanging such favours mutually
• Bilal (Gbpwh) once visited the Messenger of
  Allah (Pbuh) with some high qualities dates. The
  Prophet (Pbuh) inquired about their source. Bilal
  explained that, he traded two volumes of lower
  quality dates for one volume of higher quality
  dates. Due to this, the Prophet (Pbuh) said
• This is precisely the forbidden riba! Do not do
  this. Instead, sell the first type of dates, and
  use the proceeds to buy the others

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MUSLIM JURISTS OR SCHOLARS VIEWS ON RIBA

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

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CLASSIFICATIONS OF RIBA
Types of Riba
Riba al- Buyu(riba in trade transaction
Riba al- Duyun (riba in loan transaction)
Riba al- Qardh
Riba al- Jahilliyah
Riba al- Fadl
Riba al- Nasiah
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CLASSIFICATIONS OF RIBA (cont)

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

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CLASSIFICATIONS OF RIBA (cont)

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

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RATIONALE ON THE PROHIBITION OF RIBA

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

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RATIONALE ON THE PROHIBITION OF RIBA (cont)
Islamic banks Conventional banks
will reward the depositors only in the event where the banks are gaining profits. In the circumstances where the Islamic banks are suffering losses, the banks will not be compelled to pay any amount of profit to their depositees would be obliged to pay to the depositors more then the principal amount deposited regardless whether the financial institution is having financial difficulties or suffers loss
the clients of an Islamic bank will receive a fair share of profit based on the proportion agreed clients of a conventional bank are guaranteed to receive a fixed income from the bank, the income agreed is only a very small portion as compared to the total amount of profit gained by the banks
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RATIONALE ON THE PROHIBITION OF RIBA (cont)
Islamic banks Conventional banks
have resorted contract of exchange as the best accommodative mode of mobilising funds under an Islamic finance framework. Due to this, various innovative instruments based on the contract of exchange have been developed. Eg BBA (deferred payment sale), murabahah (mark up sale),ijarah (leasing),ijarah thumma al-bay (islamic hire purchase) and bay-al dyn (sale of debt) Accumulate profits through interest- based transactions

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

• Prohibition of Maysir in Al-Quran
• They ask Thee concerning wine and gambling. say
  "In them is great sin, and some profit, for men
  but the sin is greater than the profit." They ask
  Thee How much They are to spend say "What is
  beyond your needs." Thus doth Allah make Clear to
  you His Signs In order that ye may consider
• (al-Baqarah219)

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

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

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MAYSIR

• Speculation in the Stock Market
• Short Selling?
• This practice is clearly prohibited under the
  Shariah principles because it involves the
  selling of something which the seller does not as
  yet own.

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MAYSIR

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

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MAYSIR

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

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CONCLUSION

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