AHMAD KAMAL BIN ROSLAN 2009658166 SHAZANAH BT SARWAR KHAN 2009826226

1. AHMAD KAMAL BIN ROSLAN 2009658166 SHAZANAH BT SARWAR KHAN 2009826226

2. QUESTION 12 • Describe the following features which have been prohibited in Islam: • a. Riba • b. Maysir

3. 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” 2) increase in loan transactions Abu Bakar Jassas ; “It is a loan given with stipulated increase on the principle payable by the loance” RIBA

4. 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

5. 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”

6. 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'ancommentator and Maliki jurist states that,ribaliterally means increase, and in the al-Baqarah: 275, it stands for every increase not justified by the return.

7. 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

8. 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

9. 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- Jahilliyah:a 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

10. 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

11. RATIONALE ON THE PROHIBITION OF RIBA (cont)

12. RATIONALE ON THE PROHIBITION OF RIBA (cont)

13. RATIONALE ON THE PROHIBITION OF RIBA (cont)

14. 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.

15. 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.

16. 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 bi’l 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 wa’l maysir)

17. MAYSIR • Why Maysir is prohibited? • Dr. Mohd Ma’sum 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 individual’s 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.

18. 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-Baqarah:219)

19. 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)

20. 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)

21. 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.

22. 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)

23. 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, Shari’ah never recognises life insurance as a valid transaction.

24. 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 Shari’ah.

25. 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.

26. 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 assured’s death will occur during the policy period or not. • This uncertainty in the policy leads it to be invalid.

27. 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.

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

29. 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.”

30. 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.

31. 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.