BEING AN ENTREPRENEUR IN ISLAM PPHT Lecture.pptx

entrepreneur

1. ISLAMIC FINANCE DR AMNISUHAILAH ABARAHAN SPECIAL LECTURE FOR HALALAN TAYYIBAN RESEARCH CENTRE APRIL 2023 1

2. Fundamental prohibitions 2

3. What is Shariah ? It is the immutable Divine Law ( Shariah ) as revealed in the Quran and Sunnah Quran-main source of law Sunnah – interpretation of the law Fiqh - the sum of human effort to understand the law. 3

4. Shariah and Islamic Finance 4

5. Major Prohibition: Riba Literal meaning: excess, expansion, increase, addition or growth. Technical meaning: An excess over and above the principal of loan without any countervalue . Riba defined as: An unlawful gain derived fro the quantitative inequality of the countervalues in any transaction purporting to affect the exchange of two or more species which belong to the same genus and are governed by the same effective cause. Deferred completion of exchange of such species may also amount to riba whether or not the deferment is accompanied by an increase in any one of the exchanged countervalues . 5

6. The prohibition of Riba in the Quran 6

7. Quranic verses on the prohibition of riba Surah al- Ruum : 39 “That which you lay out for increase through the poperty of (other) people will have no increase with Allah; but that which you lay out for charity seeking the countenance of Allah (will increase); it is these who will get a recompense multiplied.” Surah al:Nisaa ’: 161 “For the inquinity of the Jews We made unlawful for them certain (foods) good and wholesome which had been lawful for them in that the hindered man from Allah’s way that they took usury, though they were forbidden, and that they devoured men’s subtonic wrongfully; We have prepared for those who reject faith a grievous punishment.” Surah Ali ‘Imran: 130 “ O you who believe! Devour not usury doubled and multiplied; but fear Allah; that you may (really prosper.” 7

8. Surah al- Baqarah : 275-281 “ Those who consume interest cannot stand (on the day of resurrection)except as one stands who is being beaten by Satan into insanity. That is because they say,” Trade is (just) like interest.” But Allah ahs permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah.But whoever returns to (dealing in interest and usury)- those are the companions of the Fire; they will abide eternally therein. Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever. Indeed those who believe and do righteous deeds and establish prayer and give zakah will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve. O you who have believed, And 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- thus you do no wrong, nor are you wronged. And if someone is in hardship, then (let there be) postponement until (a time of) ease. But if you give (from your right as ) charity then it is better for you, if you only knew. And fear a Day when you will be returned to Allah. The every soul will be compensated for what it earned, and they will not be treated unjustly. 8

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10. Riba al- Duyun It refers to an increment charged on debt principal in consideration of the repayment period. Riba al- qard The Prophet (SAW) was reported to have said that any added benefit for the lender that is contractually derived from a loan transaction is riba . Riba al- Jahiliyyah Practised during pre-Islamic Arabian society. “ Trade is similar to riba , while Allah has permitted trade and prohibited riba ” (Al- Baqarah , 2;275). 10

11. Riba al- Buyu ’ Ubadah Ibn al- Samit reported that the Prophet (SAW) said: “ Gold for gold, silver for sliver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, equal for equal and hand to hand, of the commodities differ then you may sell as you wish provided that the exchange is hand to hand” ( Muslim, hadith no: 2970). 11

12. Riba al- Buyu ’ 12

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14. Prohibition of Gharar Literal: implies risk, uncertainty and hazard. Technical: According to Ibn Qayyim , it is a sale in which the vendor is not in a position to hand over the subject matter to the buyer, regardless if the subject matter is in existence or not. According to al- Sarakhsi , gharar is a more general term, which refers to any bargain whereby the result of it is hidden. The companions related that the Prophet (SAW) has forbidden gharar in trading. Abu Hurayrah narrated that the Prophet (SAW) prohibited all sales on gharar . 14

15. Prohibition of Maysir Closely associated terms, qimar and maysir . Literal meaning: Derived from the word qamara , which means betting something and winning it. Technical meaning: Betting on one’s asset in order to acquire another person’s assets, either through competition, conditional games or other means. 15

16. Characteristics of Maysir 1. Takes place between two or more parties 2. Each participant bets his property. 3. Each participant has equal probability of gain or loss. 4. The winning party’s gain results in the loss of the other party(s). In Surah al- Ma’idah : “ O believers, wine and gambling ( maysir ), idols and divination by arrows are but abominations devised by Satan, avoid them so that may prosper (5:90)”. 16

17. Applicable Contracts for business 17

18. mudarabah 18 The Majelle : “A type of partnership where one party supplies the capital and the other labour ”. Rab al-Mal: Capital provider Mudarib : Person who performs the works.

19. Musharakah 19 Comes from the derivative sharaka شرك, , al- shirkah means mixing, joint. Al- shirkah covers shirkah al- mulk (joint ownership of a common property) and shirkah al- aqd ( partnership in a business).

20. salam 20 Definition: A sale or purchase of deferred item in exchange for an immediate price. “ O you who believe! When you deal with each other in transactions involving future obligations in a fixed period of time, put them in writing.” (2:282) When the Prophet came to Madinah , and found its inhabitants using forward contracts in fruits fro one, two or three years, the Prophet said, “ Whoever enters into a forward contract let him specify a known volume or weight and a known term of deferment.”

21. ijarah 21 Literal meaning: ‘to give something on rent’ Technical meaning: 1: to employ the services of a person on wages given to him as consideration for his hired services. 2. to transfer the usufruct of a particular property to another person in exchange for a rent claimed from him.

22. Istisna ’ 22 Literal: derived from the root word sana ’, to manufacture or to construct something. Technical: A contract to purchase for a definite price something that may be manufactured later on according to agreed specifications between the parties. It is an agreement to sell a non-existent asset to be manufactured according to agreed specifications and delivered on a specified future date at a predetermined selling price.

23. EXAMPLES OF UNETHICAL BUSINESS PRACTICES 23

24. Unethical Practices Selling products which have crossed expiry dates. Exerting influence to vendors to reduce competitors’ business or products to his advantage. Promising shipment of product, knowing it is not possible in the first place. Selling of products without prescriptions or certifications. Products transported in unsuitable transportation. Pressuring vendors to buy more than they need, pushing items that will result in higher commissions. 24

25. Ethical Issues in Advertising Over praising Advertising to minors Advertising unhealthy products 25

26. Subliminal advertising 26

27. Deceptive advertising Islamic perspective: Over praising and any form of dishonesty, moral or health hazard, non-halal products not allowed. 27

28. Unethical Practices CONT. Degrading or underestimating the substitute or product of competitors. -Giving false and misleading information on the value of the product. 28

29. -No useful information available on possible reaction or side effects of the product. -Immoral/offensive advertising 29