MORAL FINANCING AN ISLAMIC PERSPECTIVE

1. MORAL FINANCINGAN ISLAMIC PERSPECTIVE PRESENTED BY IMAM KIFAH MUSTAPHA Loyola University 3.2.10

2. Divine Guidance {Say (O Muhammad) "Verily, my prayer, my sacrifice, my living, and my dying are for Allah, the Lord of the (mankind and all that exists).}

3. FIVE RIGHTS OF HUMANS

4. Right of Life {if anyone killed a person not in retaliation of murder, or (and) to spread mischief in the land - it would be as if he killed all mankind, and if anyone saved a life, it would be as if he saved the life of all mankind}5:32.

5. Right of Freedom {There is no compulsion in religion} 2:256 Omar second Caliph for Muslims said: “When have you claimed (the right) of ownership of people while they were born free by their mothers!”

6. Right of Residence {They reply: "We were weak and oppressed on earth." They (angels) say: "Was not the earth of Allah spacious enough for you to emigrate therein}. 4:97

7. Right of Opinion Prophet Mohammad (PBUH) said: “Speak the truth even against yourselves.”

8. Right of Ownership {O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent} 4:29

9. Islam confirmed Individual Ownershipwith certain limitsto relieve it from evil

10. Reducing the Arbitrary Dominance of the Capital

11. (1) Zakah (Charity) • Take from the rich and give to the poor. • Purify your soul for no desire (including wealth) should prevent you from serving God. • Invest your money so it will not be eaten by charity. Investment strengthens economy. • Enrich the righteous value of giving vs. being stingy and cheap.

12. (2) Inheritance • A unique system that allows family members to benefit from inheritance. • If no children then other family are included. • Knowing that money will go to family will keep the personal interest in investment to be left for kids and family. It is not like money going to government or any other entity. • First class of inheritors are: children, parents, husbands and wives then brothers and sisters.

13. (3) Wills • Urge Muslims to donate to poor in their wills. • Not to exceed 33% of total inheritance. Prophet (saaw) said: “and the third is too much, it is better to leave the inheritors rich than poor.” Bukhari. • First comes first, debt and loans must be secure first. The right of collectors is before the right of inheritors. Allah said: {(The distribution in all cases is) after the payment of legacies he may have bequeathed or debts} 4:11.

14. (4) Share gains with poor • {And know that whatever of war-booty that you may gain, verily one-fifth of it is assigned to Allah, and to the Messenger, and to the (prophet’s) near relatives ,the orphans, the poor and the wayfarer.} 4:41. • {What Allah gave as to His Messenger from the people of the townships - it is for Allah, His Messenger the kindred the orphans, the poor, and the wayfarer, in order that it may not become a fortune used by the rich among you} 59:7

15. (3) Investment not Hoarding • Muslims are urged to keep investing their money. • Savings are regulated by giving the charity of 2.5% every year. • {And those who hoard up gold and silver and spend them not in the Way of Allah, announce unto them a painful torment} 9:34

16. Kind Offers • {Who is he that will lend to Allah a goodly loan so that He may multiply it to him many times? And it is Allah that decreases or increases (your provisions), and unto Him you shall return} 2:244 • The prophet (saaw) said: “Allah shall be in help to those who help their brothers.” Bukhari

17. Preserving National and Individual Funds

18. (1) Restricting the mentally challenged {And give not unto the mentally incompetent your property which Allah has made a means of support for you, but feed and clothe them therewith, and speak to them words of kindness and justice}. 4:5

19. (2) Testing orphans before handing money over to them {And try orphans (as regards their intelligence) until they reach the age of marriage; if then you find sound judgment in them, release their property to them, but consume it not wastefully, and hastily fearing that they should grow up, and whoever (amongst guardians) is rich, he should take no wages, but if he is poor, let him have for himself what is just and reasonable (according to his labor). And when you release their property to them, take witness in their presence; and Allah is All-Sufficient in taking account} 4:6

20. (3) Documenting Contracts {O you who believe! When you contract a debt for a fixed period, write it down. Let a scribe write it down in justice between you. Let not the scribe refuse to write as Allah has taught him, so let him write} 2:282

21. (4) Prohibiting Usury • Money is a trust put in the hands of a person to be invested for the general welfare. • Owner of wealth has no right to take advantage of the needs of others and ask for more than what he gave. • Lending money leads to affection and leads to cooperation among community members. • Lending money should be based on help not abuse.

22. (4A) Prohibiting Usury • {If you disclose your (alms-giving), it is well; but if you conceal them, and give them to the poor, that is better for you. (Allah) will expiate you some of your sins. And Allah is Well-Acquainted with what you do.} 2:271. • {Not upon you (Muhammad) is their guidance, but Allah guides whom He wills. And whatever you spend in good, it is for yourselves, when you spend not except seeking Allah's Countenance. And whatever you spend in good, it will be repaid to you in full, and you shall not be wronged} 2:272

23. (4B) Prohibiting Usury • {Those who spend their wealth by night and day, in secret and in public, they shall have their reward with their Lord. On them shall be no fear, nor shall they grieve} 2:274. • Those who eat (usury) will not stand except like the standing of a person beaten by (Satan) leading him to insanity. That is because they say: "Trading is only like (usury)," whereas Allah has permitted trading and forbidden (usury). 2:275

24. (4C) Prohibiting Usury • {Allah will destroy (usury) and will give increase for deeds of charity And Allah likes not the disbelievers, sinners} 2:276 • Truly those who believe, and do deeds of righteousness, and perform prayers and give charity, they will have their reward with their Lord. On them shall be no fear, nor shall they grieve} 2:277

25. (4D) Prohibiting Usury {O you who believe! Be afraid of Allah and give up what remains (due to you) from (usury) (from now onward), if you are (really) believers} 2:278

26. (4E) Prohibiting Usury If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you.  36 Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you.  37 You must not lend him money at interest or sell him food at a profit. (Leviticus) 25:35/38

27. Why is Usury Prohibited? • It causes enmity and puts an end to cooperation among people. • The usurer will become a parasite living on the labor of others. • Trade requires hard work, skill and high spirit while usury forms a class who live in ease and luxury and do nothing! • Usury creates a constant feeling of restlessness to both lender and borrower.

28. Why is Usury Prohibited? (2) • Appealing investment but very disastrous. Instead of investing in real available assets, borrowing with usury is risky. In case that the value of merchandise drops, the amount of the debt and the corresponding interest to be paid back leads to complete bankruptcy. • Colonization inside the system. People become numbers with their lives and future controlled. • Invitation to crimes of all kinds.

29. Showing Kindness to the Poor

30. Donating for the sake of God {The likeness of those who spend their wealth in the Way of Allah, is as the likeness of a grain (of corn); it grows seven ears, and each ear has a hundred grains. Allah gives manifold increase to whom He wills. And Allah is All-Sufficient for His creatures' needs, All-Knower.} 2:261

31. Commerce or Trade Conditions

32. Merchandise • Merchandise must be lawful in Islam. The prophet (saaw) said: “Allah has forbidden the sale of intoxicants, dead (animals), pigs and idols.” Bukhari. • Merchandise must be deliverable. “The prophet (saaw) prohibited the diving luck (selling fish per dive) and the sale of unborn animal babies.” Baihaqi. • Merchandise must be clear in description, amount, time of delivery and cost.

33. Prohibiting Monopoly The prophet (saaw) said: “One who entered in (the purchase of) something to raise price on them, Allah shall set him in fire at the Day of Judgment.” Munziri.

34. Islamic Contracts

35. Musharakah or Equity Partnership • Two or more contribute capital to a project not necessarily equal in amount. • Larger equity means more control over decisions. • Loss or gain is on the percentage in equity invested.

36. Mudarabah Capital versus expertise or management • One provides money and the other provides management or expertise. • Profit ‘s percentage is determined in the contract. • Loss is capital on the first, and time and effort on the other.

37. Murabahah orInstallment Credit Agreement • The seller earns a profit as a markup. • The markup can be fixed or a percentage of the cost of the goods or property purchased.

38. Ijarah or rent or lease • Owner transfers the use of benefit of an asset in exchange of cash. • It doesn't transfer ownership. • Owner assumes most risk.

39. General information under Islamic Financing

40. Lawful investment only • No intoxicants • No gambling. • No conventional Financial Services • No pork products. • No Pornography The 5 to 10 % rule.

41. Areas of necessity • Travel • Sickness • Duress • Ignorance • General unpreventable problems Some restrictions might be at ease for these necessities