The document discusses the principles of Islamic finance, focusing on key concepts such as sale, contracts, and major prohibitions like riba (usury). It elaborates on the importance of fulfilling contracts as stipulated in the Quran and emphasizes that riba is strictly forbidden due to its unethical implications in financial transactions. Additionally, it touches on various Islamic financial contracts such as mudarabah, musharakah, and ijarah, as well as the importance of ethical conduct in business practices.

1. ISLAMIC FINANCE
DR AMNISUHAILAH
ABARAHAN
SPECIAL LECTURE FOR
HALALAN TAYYIBAN
RESEARCH CENTRE
APRIL 2023
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2. SALE DEFINITION
“ To change property for property and it is either mun’aqid
(concluded) or ghayr mun’aqid (concluded).
Some jurists added ‘earning’. “ Change property for property by way
of earning”.
The word ‘property’ excludes exchange of property and usufruct.
Sale means delivery of a definite object which possesses legal value
in exchange for something equivalent in value called price.
Transfer of ownership
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3. CONTRACT DEFINITION
“ O you who believe fulfill your contracts.” Surah al-Ma’idah:1
Contract in Arabic is ‘aqd, the plural ‘uqud.
Literal meaning: “ to tie”, “to knot”, “ to join”, “to lock”, “to hold”, “ to
contract” and more.
Technical meaning: “ Conjunction of a proposal or ijab and an
acceptance of qabul”
Also , “Conjunction of the elements of disposition, namely proposal
(ijab) and acceptance (qabul).
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4. Example: If someone offers to another: “ I have sold my house to you
with such and such amount.” The other person accepts it and states: “
I have accepted your offer and bought it from you with the said
amount.”
Effect of this contract: ownership transfer
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5. FUNDAMENTAL PROHIBITIONS
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6. 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.
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7. SHARIAH AND ISLAMIC FINANCE
Islam
Aqidah Shariah
Ibadah Muamalat
Political
activities
Economic
Activities
Other
economic
activities
Banking &
Financial
activities
Social Activities
Akhlaq
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8. 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 from 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.
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9. THE PROHIBITION OF RIBA IN THE
QURAN
Surah Ar-Rum 30:39
Riba compared with zakat
& charity, praising zakat
& charity , not riba
Surah An-Nisa’
4:161
The practice of the Jews,
considered to be a zulm
act
Surah ‘Ali Imran
3:130-132
The Prohibition of
charging double and
multiple riba.
Surah Al-Baqarah
2:275-281
The prohibition of all
forms of riba, any excess
is not allowed.
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10. 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.”
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11. 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.
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12. Riba
Riba al-Duyun
(Loan contract)
Riba al-Qard
(Interest in loan)
Riba al-Jahiliyyah
(Penalty fue to
late payment)
Riba al-Buyu’
(Exchange
Contract)
Riba al-Nasa’i
(Deferment)
Riba al-Fadl
(Excess)
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13. 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).
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14. 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).
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15. RIBA AL-BUYU’
Riba al-Nasa’i
•Delay in delivery and
exchange of ribawi
items involving genus
and within the same
category (eg. Gold and
silver)
Riba al-Fadl
•Exchange of ribawi item
with the same item in
unequal amounts
•Example: Exchange of
20 ounces of gold for 22
ounces of gold.
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16. 16

17. 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.
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18. 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.
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19. 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)”.
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20. APPLICABLE CONTRACTS FOR
BUSINESS
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21. MUDARABAH
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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.

22. MUSHARAKAH
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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).

23. SALAM
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 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.”

24. IJARAH
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 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.

25. ISTISNA’
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 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.

26. EXAMPLES OF UNETHICAL
BUSINESS PRACTICES
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27. EXAMPLES OF UNETHICAL
BUSINESS 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.
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28. EXAMPLES OF ETHICAL ISSUES IN
ADVERTISING
Over praising
Advertising to minors
Advertising unhealthy products
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29. SUBLIMINAL ADVERTISING
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30. DECEPTIVE ADVERTISING
Deceptive advertising
Islamic perspective: Over praising
and any form of dishonesty, moral or health
 hazard, non-halal products not allowed.
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31. UNETHICAL PRACTICES CONT.
Degrading or underestimating the substitute
or product of competitors.
Giving false and misleading information on
the value of the product.
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32. CONT
No useful information available on possible
reaction or side effects of the product.
Immoral/offensive advertising
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