1. Riba, Gharar and Maysir Faraz Younus Bandukda

2. Five basic principles 1. Interest Free Transactions. 2. Risk Sharing 3. Asset & Service Backing 4. Gharar free contracts 5. Gambling free contracts In compliance with Shariah Principles

3. Conventional BankClient money money + money (interest)

4. Islamic BankClient Goods & Services money

5. What is Riba  Means excess, increase or addition  Any excess compensation without due consideration  Every loan that draws interest (Hazrat Ali RAA)  Every loan that draws profit (Fazala bin Obaid RAA)  Every loan that draws more than its actual amount (Arab Scholar-Abu Ishaq)

6. Riba in Qur’an “ That which you give as interest to increase the people’s wealth increases not with God; but that which you give in charity, seeking the goodwill of Allah, multiples manifold.” (The Rome – Sura al-Rum 30:39)

7. “ And for their taking interest even though it was forbidden for them and their wrongful appropriation of other peoples’ property. We have prepared for those among them who reject faith a grievous punishment” (Woman – Sura Al-Nisa’ 4:161)

8. “ O Believer, take not doubled and redoubled interest [interest on interest], and fear God so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey God and the Prophet so that you may receive mercy” (The family of Imran – Sura Al-Imran)

9. “Those who benefit from interest shall be raised like those who have been driven to madness by the touch of devil; this is [just] BECAUSE THEY SAY: “Trade is like interest” while Allah has permitted trade and forbidden interest. Hence, those who have received the admonition from their Lord and desist, may keep their previous gains, their case being entrusted to God’ but those who revert shall be inhabitants of fire and abide therein forever” (The Cow – Sura Al-Baqara 2:275)

10. “God deprives interest of all blessing, but blesses charity; He loves not the ungrateful sinner” (The Cow – Sura Al-Baqara 2:276)

11. “O believers, fear Allah, and give up what is still due to you from the interest (usury), IF [indeed] you are true believers[!!!]. If you do not do so, then take Notice of War from Allah and his Messenger. But, if you repent, you can have your principal. Neither should you commit injustice, nor should you be subjected to it.” (The Cow – Sura Al-Baqara 2:278-9)

12. Riba in Hadith “The Holy Prophet SAW cursed  the receiver and  the payer of interest,  the one who records it and  the two witnesses to the transaction  and said: “They are all alike (in guilt).” (Sources: Jabir ibn Abdullah, Muslim, Tirmidhi, Musnad Ahmed)

13. Riba in Hadith “A dirham of riba which a man receives knowingly is worse than committing adultery thirty six times.” (Sources: Abdallah ibn Hanzalah. Mishkat al- Masabih.Bayqahi) The Holy Prophet SAW said: “Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother.” (Sources: Aby Hurayrah, Ibn Majah) The Holy Prophet SAW said: “Even when interest is much, it is bound to end up in paltriness.” (Sources: Ibn Mas`ud, Ibn Majah, Musnad Ahmad)

14. Arguments - 1  Verses revealed in the last days and Holy Prophet SAW could not have an opportunity to interpret them properly.  Therefore no hard and fast definition of the term Riba can be found in the Holy Qur’an or in the Sunnah.

15. Arguments - 2  Riba refers only to the usurious loan on which an excessive rate of interest used to be charged by the creditors which would entail exploitation.  Modern banking can not termed as Riba if the rate of interest is not excessive.

16. Arguments - 3  The word Riba used in the Holy Qur’an is restricted to the increased amount charged on the consumption loans used to be taken by the poor people.  Modern commercial loans were neither in vogue in the days of Prophet SAW nor addressed by the Qur’an.  Currently Debtors are not poor people. No Zulm

17. Arguments - 4  The Holy Qur’an prohibited only Riba-al- Jahiliyya.  Increased amount stipulated in the agreement does not constitute Riba-al-Jahiliyya.  It may be Riba-al-Fadl but at lesser degree so can be makrooh not haram.

18. Arguments - 5  Although the modern interest-based transactions are covered by the prohibition of Riba, yet the commercial interest being the back bone of the modern economic activities throughout the world, no country can live without being involved in interest based transactions.  Islam being a practical religion recognizes the principle of necessity and has allowed even to eat pork in extreme situation.  The same principle be applied in case of Riba.

19. Types of Riba  Riba An Nasiyah’ / Riba Al Jahiliya / Riba Al Qur’an is defined as excess, which results from predetermined interest (sood) which a lender receives over and above the principle (Rsul Mal).  Riba Al Fadl / Riba Al Bai / Riba An Naqd / Riba Al Hadith is defined as excess compensation without any consideration resulting from a sale of homogeneous goods.

20. Riba Al Fadl / Hadith  Taken in exchange of specific homogenous commodities  Encountered in their hand-to-hand purchase  Sale as explained in the famous hadith.

21. Hadith regarding Riba Al Fadl The Holy Prophet SAW said: “Sell,  Gold in exchange of equivalent amount of Gold,  Silver in exchange of equivalent amount of Silver  Dates in exchange of equivalent amount of Dates  Wheat in exchange of equivalent amount of Wheat  Salt in exchange of equivalent amount of Salt  Barley in exchange of equivalent amount of Barley But if a person transacts in excess it is usury (Riba), However, sell gold for silver anyway you please on the condition it is hand to hand (spot) and sell barley for dates anyway you please on the condition it is hand –to-hand.” Sahi Muslim

22. Ijtihad on Riba Al Fadl  Applies to all commodities which have volume or weight  Applies to all mediums of exchange  Applies to all homogeneous goods

23. What is Gharar?  Deception / Cheating  Temptation  Uncertainty  Un known / non awareness / non specification

24. Elements of Contract  Contractor (Parties)  Wording of Contract  Subject Matter / Subject of Contract  Consideration / Price Types  Compensatory contracts Musharaka/ Murabaha/Sale/Wakala/Salam/Istisna/Ijara  Voluntary Contract Dain (Receivables) / loan / Trust / Guarantee / Ariat

25. Basis Reasons of Gharar  Uncertainty in the existence of Subject Matter  Uncertainty in the delivery of Subject Matter  Un Known (Jihala) Subject Matter Price Duration Contract

26. Uncertainty in the existence of Subject Matter  Not exist  Not in ownership(Short Sale)  Not in possession Physical possession Constructive possession

27. Uncertainty in the delivery of Subject Matter  Sale of car which has been stolen  Sale of debt (Bai-ul-Dain)  Sale of price  Discounting of the bill of exchange

28. Un Known (Jihala)  Jihala in Contract Wording(Spot and deferred not set) Two contracts in one contract Sale contengent on a future event

29. Un Known (Jihala)  Jihala in Subject Matter Specified Nature Quality Quantity

30. Un Known (Jihala)  Jihala in Duration of payment Major Jahalat(Subject to rain in Karachi) Minor Jahalat(Subject to receiving of salary)

31. Un Known (Jihala)  Jihala in Price Sale while price is unknown Sale on Market Value Sale of Istagrar(Normal grocery shopping)

32. What is Qimar (Mayser)?  Game of Chance – one gain at the cost of other  One party’s profit is dependent on the loss of the other  To stipulate/conditionalize the ownership/profitability on uncertain event, whereas money is involved in the both sides.  The risk of losing on both sides (or putting something at stake from both sides) is gambling.? (Ahkam al-Quran, 2/11)

33. What is Qimar (Mayser)?  a transaction in which the act of making someone the owner of one’s wealth (or something else of value) is contingent on such a condition that both of its sides are equal (i.e. the outcome of which is uncertain). Consequently, there are two equal possibilities of gaining total profit or suffering total loss.  Hence, we can say that gambling is an activity in which the players voluntarily transfer money or something else of value amongst themselves, but this transaction is contingent upon the outcome of some future uncertain event.

34. Qimar (Mayser) in Qur’an  They ask thee concerning wine and gambling. Say “In them is great sin and some benefits for people; but the sin is greater than the benefits. (Al Baqra – 219)

35. Qimar (Mayser) in Qur’an  O believers! Intoxicants and gambling and Al Ansab (Animals sacrificed for idols) and Al Azlam (arrows for seeking luck or decision) are an abomination of Satan's handiwork. So avoid them in order that you may be successful. Satan wants only to excite enmity and hatred between you with intoxicants and gambling and hinder you from the remembrance of Allah and from prayer. So, will you not then abstain? (Al Maidah 90 – 91)

36. Qimar (Mayser) in Hadith  Sayyiduna Abu Hurayra (Allah be pleased with him) narrates that the Messenger of Allah (Allah bless him & give him peace) said: ??Whosoever says to another: come lets gamble should give in charity (Sahih al-Bukhari, no. 4579)

37. Four Elements in Qimar (Mayser)  It is a transaction between two or more people  In this transaction, in order to gain someone else’s wealth, one places his wealth at stake, whether actually or by promising to pay it later  Gaining of another’s wealth is contingent upon some uncertain event in the future, and both possibilities of it occurring and not occurring are present  The wealth which one puts at stake is either lost completely without anything in return (and because of which one suffers a complete loss), or it brings with it some wealth of the other person without giving anything in return (because of which the other person suffers a complete loss).