Shari’ah Rulings on Investment Prof. Dr. Mohd. Ma’sum Billah

Investment 0Why we invest?  To obtain a benefit further away in the future. 0What to invest in?  Physical assets  Financial assets

Shari’ah Rulings in Investment Contracts 0Investments Should Only Support Halal Activities وَلاَ تَأْكُلُواْ أَمْوَالَكُم بَيْنَكُم بِالْبَاطِلِ وَتُدْلُواْ بِهَا إِلَى الْحُكَّامِ لِتَأْكُلُواْ فَرِيقًا مِّنْ أَمْوَالِ النَّاسِ بِالإِثْمِ وَأَنتُمْ تَعْلَمُونَ (Al-Baqarah: 188) “And eat up not one another's property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.), nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully".

0Prohibition of Interest (Riba) يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافًا مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ (Ali `Imran: 130) “O you who believe! Eat not Riba (usury) doubled and multiplied, but fear Allah that you may be successful ”. ~ Shari’ah Rulings in Investment Contracts

0Gharar (Uncertainty or Speculation) Is Prohibited يَا أَيُّهَا الَّذِينَ آمَنُواْ إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالأَنصَابُ وَالأَزْلاَمُ رِجْسٌ مِّنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُون (Al-Maidah: 90) “O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­ Ansab, and Al­Azlam (arrows for seeking luck or decision) are an abomination of Shaitan's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful”. ~ Shari’ah Rulings in Investment Contracts

0Preserve the Unity of Mind and Sincerity in Investment Contracts and Dealings يَا أَيُّهَا الَّذِينَ آَمَنُوا لِمَ تَقُولُونَ مَا لَا تَفْعَلُونَ كَبُرَ مَقْتًا عِندَ اللَّهِ أَن تَقُولُوا مَا لَا تَفْعَلُونَ ( As-Saff: 2-3) “O you who believe! Why do you say that which you do not do? Most hateful it is with Allah that you say that which you do not do”.

~ Shari’ah Rulings in Investment Contracts 0Every contractual party should honour contractual promises يَا أَيُّهَا الَّذِينَ آمَنُواْ أَوْفُواْ بِالْعُقُودِ (Al-Maidah: 1) "O you who believe! Fulfill (your) obligations”

~ Shari’ah Rulings in Investment Contracts 0Every Transaction Must Be Performed With Utmost Good Faith and Mutual Goodwill يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ إِلاَّ أَن تَكُونَ تِجَارَةً عَن تَرَاضٍ مِّنكُمْ (An-Nisaa: 29) O you who believe! Eat not up your property among yourselves unjustly except it is a trade amongst you, by mutual consent.

Guidelines of Islamic Investment Making Money from Money is not Permissible; Profit and Loss Sharing; Complete segregation of funds; The existence of a Shari’ah supervisory board;

Management committed to Islamic financial concepts; Safeguarding Muslim investors' funds from negligence, trespass, and fraud; Compliance with the standards of the AAOIFI. Guidelines of Islamic Investment

Principles of Islamic Investment Profit-sharing 0Musyarakah وَإِنَّ كَثِيرًا مِّنْ الْخُلَطَاء لَيَبْغِي بَعْضُهُمْ عَلَى بَعْضٍ إِلَّا الَّذِينَ آمَنُوا وَعَمِلُوا الصَّالِحَاتِ (As-Shaad:24) "And, verily, many partners oppress one another, except those who believe and do righteous good deeds” 0Mudharabah Holy Prophet pbuh: ‘The hands of Allah will always work together with the two parties in the partnership so long as they do not betray one another’

Principles of Islamic Investment Deposits 0 Al-Wadi’ah Maintain the trust and deliver the trusted items to its beneficiary إِنَّ اللّهَ يَأْمُرُكُمْ أَن تُؤدُّواْ الأَمَانَاتِ إِلَى أَهْلِهَا وَإِذَا حَكَمْتُم بَيْنَ النَّاسِ أَن تَحْكُمُواْ بِالْعَدْلِ إِنَّ اللّهَ نِعِمَّا يَعِظُكُم بِهِ (An-Nisaa: 58) “Verily! Allah commands that you should render back the trusts to those, to whom they are due; and that when you judge between men, you judge with justice…….”.

Principles of Islamic Investment Sale & Purchase 0Bai’ Al-Murabahah (Deferred Payment Sale) Prophet Muhammad pbuh; ‘Blesses are on these three: deferred sale and purchase, mudharabah & mixing flour for the household not for sale’ (Ibnu Majah)

Principles of Islamic Investment 0Bai’ al-Salam (In-Front Payment Sale) يَا أَيُّهَا الَّذِينَ آمَنُواْ إِذَا تَدَايَنتُم بِدَيْنٍ إِلَى أَجَلٍ مُّسَمًّى فَاكْتُبُوهُ (Al-Baqarah:282) “O you who believe! When you contract a debt for a fixed period, write it down….”

Principles of Islamic Investment 0Bai’ al-Istisna’ (Purchase by Order or Manufacture) According to Hanafi’s mazhab, bai’ al-Istisna’ is permissible based on the following reasons:  It is a common practice in the society (`urf)  The need of society (public interest)  Not against any of the Shari`ah rulings

Principles of Islamic Investment 0Al-Ijarah (Leasing) وَإِنْ أَرَدتُّمْ أَن تَسْتَرْضِعُواْ أَوْلاَدَكُمْ فَلاَ جُنَاحَ عَلَيْكُمْ إِذَا سَلَّمْتُم مَّآ آتَيْتُم بِالْمَعْرُوفِ وَاتَّقُواْ اللّهَ وَاعْلَمُواْ أَنَّ اللّهَ بِمَا تَعْمَلُونَ بَصِيرٌ (Al-Baqarah:233) “And if you decide on a foster suckling-mother for your children, there is no sin on you, provided you pay (the mother) what you agreed (to give her) on reasonable basis. And fear Allah and know that Allah is All-Seer of what you do.”