The following is the answer to a question we received from a participant of one of our recent seminars.
Question: Please can you clarify why Public Limited Companies (PLC's) i.e. stock market companies are prohibitted in Islam and why trading in shares in them is haram as well.
Answer: The public limited company system gives the public company a distinct quality of limited liability, aimed at protecting major capitalists and businessmen in case the company fails and incurs losses, in which case, those who have claims against it would not be able to demand from its investors any compensation no matter how large the personal assets of the investors are. The financial claims are only confined to what is left in the company in terms of assets.This system is contradictory to Shari'ah in every aspect.
The Shari'ah rule obliges all to repay debts in full to the rightful owners, and it is forbidden to cut anything from them.
Al-Bukhari reported on the authority of Abu Hurayrah that the Messenger of Allah (saw) said: "He who takes money from people with the intention of paying it back Allah will pay on his behalf, and he who takes it with the intention to waste it Allah will waste him."
Ahmed also reported on the authority of Abu Hurayrah who said: The Messenger of Allah (saw) said: "You shall return the rights to their rightful owners on the Day of Judgement, even the ewe with no horns will get even with the ewe with horns by butting it back."
Hence, the Messenger of Allah (saw) has confirmed the obligation of fulfiling one's rights in full in temporal life, and if one does not he will do so on the Day of Judgement. This serves as a warning for those who devour people's rights.
The Shari'ah has made it an unjust act for the rich to delay the settlement of their debts.
Al-Bukhari reported on the authority of Abu Hurayrah who said: The Messenger of Allah (saw) said: "The delay by the rich is unjust."
If the delay in settling the debt is unjust, what would the devouring of the rights and the non settlement of the debts be?
Indeed it would be a greater injustice and would entail a graver punishment. The Messenger of Allah (swt) has taught us that the best people are those who are best when it comes to settling their debts, for Al-Bukhari reported that the Messenger of Allah (saw) said: "Truly the best from amongst you are those who are best in settling debts."
Therefore to restrict the settlement of debts to those who have claims against the company, only after clearance of the public company's losses, is forbidden. Rather they should be given all that is owed to them in terms of rights or debts in full from the assets of the investors.
This is as far as granting the public companies a limited liability. As for the public limited companies themselves, they contradict the rules of companies in Islam. This is so because the public company according to their definition : "A contract in which two or more persons undertake that each one of them participate in a financial project, by tendering a sum of money, thus sharing what this project yields in terms of profit or loss."
According to this definition and according to the reality pertaining to the founding of the public company or the Joint-Stock Company, it becomes clear that it is not a contract between two people or more according to the Islamic Shari'ah rules, because the contract according to Shari'ah is based on offer and acceptance between two parties. In other words it means that there should be two parties in the contract. One party assumes the offer, i.e. he initiates the offer of the contract by saying: "I enter into partnership with you" or words to this effect; and the other party expresses acceptance by saying: "I accept" or "I consent" or words to this effect. If the contract is lacking the presence of two parties and the presence of offer and acceptance, nothing can be contracted and nothing can be called a legitimate contract.
The reality of the public company contradicts the reality of the company in Islam. The company in Islam is: "A contract between two or more parties, who agree to undertake a financial venture with the aim of making a profit." It is therefore a contract between two or more parties; thus it could not be unilateral. An agreement should rather take place between two or more parties. The contract itself should be based on the undertaking of a financial transaction with the aim of making a profit. It is not fitting for the contract to be based on the mere payment of money. It is also not fitting for the aim to be just for the sake of entering into a partnership. Hence, undertaking the financial venture is the basis in the company contract.
In the public companies, partnership is concluded by the mere presence of partners in capital only. The public company assumes its activities without the presence of a physical partner. According to Shari'ah, the partner in capital, has no right to run the company, nor does he have the right to work in the company as a partner. The running of the company and working in the company is confined to the physical partner only.
As for the shares of such companies, these are financial papers representing a share in the company at the time of purchase or at the time of evaluation. They do not represent the capital of the company at the time of establishment. The share is an integral part of the company's entity and it is not part of its capital. The value of the shares is not unique nor is it stable. It rather varies according to the profits and losses of the company. They are not unique and fixed at all times, but they are constantly fluctuating.
As for the Shari'ah rule pertaining to the dealing in these shares and in securities, whether buying or selling, it is forbidden. This is because these shares are those of a company that is unlawful according to Shari'ah. They are in fact certificates of bills which contain mixed sums from a lawful capital and unlawful profits made from an unlawful transaction. Each bill represents the value of a share, and this share represents part of the assets that belong to the unlawful company.These assets have been mixed with an unlawful transaction which Shari'ah has prohibited. Thus, it is illicit money, whose buying and selling becomes unlawful, and dealing in such money is also illicit. This is also the case for bonds, in which money is invested with interest, and so is the case for bank shares and similar, since they all contain sums of illicit money; thus their buying and selling is unlawful, because the money contained in them is illicit.
Wednesday, November 5, 2008
Wednesday, October 15, 2008
Q&A: Paying and recieving interest
The following is the answer to a question we received by email following our recent seminar.
Question:
Assalamu alaikum,
I wanted to ask you that paying and recieving interest is haram. But what if a person who is poor and need money for education of his children or for devlopment of his farm has to take loan from a bank by paying interest? Is it permissible in Islam?
Thank you,
ALLA HAFIZ.
Answer:
Assalam wa alaikum
Thank you for your question
Paying and receiving interest (riba) is one of the great sins (kaba'ir) in Islam. It has been prohibitted in many clear verses of the Quran and ahadith, such as:
الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ
"Those who charge riba are in the same position as those controlled by the devil's influence. This is because they claim that riba is the same as commerce. However, God permits commerce, and prohibits riba. Thus, whoever heeds this commandment from his Lord, and refrains from riba, he may keep his past earnings, and his judgment rests with God. As for those who persist in riba, they incur Hell, wherein they abide forever" [Al Baqarah: 275]
يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276) إِنَّ الَّذِينَ آَمَنُوا وَعَمِلُوا الصَّالِحَاتِ وَأَقَامُوا الصَّلَاةَ وَآَتَوُا الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ (277) يَا أَيُّهَا الَّذِينَ آَمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279) وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَى مَيْسَرَةٍ وَأَنْ تَصَدَّقُوا خَيْرٌ لَكُمْ إِنْ كُنْتُمْ تَعْلَمُونَ
"God condemns riba, and blesses charities. God dislikes every disbeliever, guilty. Lo! those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve. O you who believe, you shall observe God and refrain from all kinds of riba, if you are believers. If you do not, then expect a war from God and His messenger. But if you repent, you may keep your capitals, without inflicting injustice, or incurring injustice. If the debtor is unable to pay, wait for a better time. If you give up the loan as a charity, it would be better for you, if you only knew." [Al Baqarah: 276-280]
As Muslims we believe due to the reality and the clear textual evidences from the Quran and the Sunnah that our livelihood (rizq) is fixed by Allah (swt) and is not dependent on our efforts, we are obliged to seek our rizq in a halal way. There are many clear texts from the Quran regarding this issue, such as:
وَلاَ تَقْتُلُواْ أَوْلادَكُمْ خَشْيَةَ إِمْلاقٍ نَّحْنُ نَرْزُقُهُمْ وَإِيَّاكُم إنَّ قَتْلَهُمْ كَانَ خِطْءًا كَبِيرًا"And do not slay your children, feraing a fall to poverty. We shall provide for thm and for you." [Al-Israa': 31]
إِنَّ اللَّهَ هُوَ الرَّزَّاقُ ذُو الْقُوَّةِ الْمَتِينُ"Lo! Allah is that who gives livelihood, the Lord of unbreakable might." [Adh-Dhariyaat: 58]
Poverty is not an excuse to commit haram and does not constitute a reason for taking an interest based loan. This life is a test for us from Allah (swt) and He (swt) tests us all in different ways, following the Shariah is the path to attain Jannah. The Prophet (saw) said: "The dunya (world) is a prison for the believer and paradise for the Kafir (disbeliever)." [Sahih Muslim, vol.4, #7058]
If someone is poor there should see this as a test and not rebel against the commands of Allah (swt). Allah (swt) says in the Quran:
وَأَمَّا إِذَا مَا ابْتَلَاهُ فَقَدَرَ عَلَيْهِ رِزْقَهُ فَيَقُولُ رَبِّي أَهَانَنِ"But when He tries him by straitening his means of life, he says: My Lord despises me." [Al-Fajr: 16]
Remember our Rizq will come to you whether we do haram or halal actions to achieve it, therefore we should only undertake the halal actions in order to achieve it and what Allah (swt) has set for us we will receive.
Wassalam
Question:
Assalamu alaikum,
I wanted to ask you that paying and recieving interest is haram. But what if a person who is poor and need money for education of his children or for devlopment of his farm has to take loan from a bank by paying interest? Is it permissible in Islam?
Thank you,
ALLA HAFIZ.
Answer:
Assalam wa alaikum
Thank you for your question
Paying and receiving interest (riba) is one of the great sins (kaba'ir) in Islam. It has been prohibitted in many clear verses of the Quran and ahadith, such as:
الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ
"Those who charge riba are in the same position as those controlled by the devil's influence. This is because they claim that riba is the same as commerce. However, God permits commerce, and prohibits riba. Thus, whoever heeds this commandment from his Lord, and refrains from riba, he may keep his past earnings, and his judgment rests with God. As for those who persist in riba, they incur Hell, wherein they abide forever" [Al Baqarah: 275]
يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276) إِنَّ الَّذِينَ آَمَنُوا وَعَمِلُوا الصَّالِحَاتِ وَأَقَامُوا الصَّلَاةَ وَآَتَوُا الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ (277) يَا أَيُّهَا الَّذِينَ آَمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279) وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَى مَيْسَرَةٍ وَأَنْ تَصَدَّقُوا خَيْرٌ لَكُمْ إِنْ كُنْتُمْ تَعْلَمُونَ
"God condemns riba, and blesses charities. God dislikes every disbeliever, guilty. Lo! those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve. O you who believe, you shall observe God and refrain from all kinds of riba, if you are believers. If you do not, then expect a war from God and His messenger. But if you repent, you may keep your capitals, without inflicting injustice, or incurring injustice. If the debtor is unable to pay, wait for a better time. If you give up the loan as a charity, it would be better for you, if you only knew." [Al Baqarah: 276-280]
As Muslims we believe due to the reality and the clear textual evidences from the Quran and the Sunnah that our livelihood (rizq) is fixed by Allah (swt) and is not dependent on our efforts, we are obliged to seek our rizq in a halal way. There are many clear texts from the Quran regarding this issue, such as:
وَلاَ تَقْتُلُواْ أَوْلادَكُمْ خَشْيَةَ إِمْلاقٍ نَّحْنُ نَرْزُقُهُمْ وَإِيَّاكُم إنَّ قَتْلَهُمْ كَانَ خِطْءًا كَبِيرًا"And do not slay your children, feraing a fall to poverty. We shall provide for thm and for you." [Al-Israa': 31]
إِنَّ اللَّهَ هُوَ الرَّزَّاقُ ذُو الْقُوَّةِ الْمَتِينُ"Lo! Allah is that who gives livelihood, the Lord of unbreakable might." [Adh-Dhariyaat: 58]
Poverty is not an excuse to commit haram and does not constitute a reason for taking an interest based loan. This life is a test for us from Allah (swt) and He (swt) tests us all in different ways, following the Shariah is the path to attain Jannah. The Prophet (saw) said: "The dunya (world) is a prison for the believer and paradise for the Kafir (disbeliever)." [Sahih Muslim, vol.4, #7058]
If someone is poor there should see this as a test and not rebel against the commands of Allah (swt). Allah (swt) says in the Quran:
وَأَمَّا إِذَا مَا ابْتَلَاهُ فَقَدَرَ عَلَيْهِ رِزْقَهُ فَيَقُولُ رَبِّي أَهَانَنِ"But when He tries him by straitening his means of life, he says: My Lord despises me." [Al-Fajr: 16]
Remember our Rizq will come to you whether we do haram or halal actions to achieve it, therefore we should only undertake the halal actions in order to achieve it and what Allah (swt) has set for us we will receive.
Wassalam
Sunday, October 12, 2008
About Us
Muslim Intellectuals’ Forum is a forum of concerned persons having come together for the furtherance of intellectual debate with an aim of raising the thinking level of participants.
Our Aims:
1) MIF shall exert to instill, foster and propagate the correct Islamic teachings for the benefit of Muslims and the entire humankind in general.
2) Create effective edifice for disseminating correct knowledge and information between divergent communities and groups with a spirit of mutual respect and fairness.
3) Create effective edifice for disseminating correct knowledge and information between divergent communities and groups with a spirit of mutual respect and fairness.
Our Aims:
1) MIF shall exert to instill, foster and propagate the correct Islamic teachings for the benefit of Muslims and the entire humankind in general.
2) Create effective edifice for disseminating correct knowledge and information between divergent communities and groups with a spirit of mutual respect and fairness.
3) Create effective edifice for disseminating correct knowledge and information between divergent communities and groups with a spirit of mutual respect and fairness.
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