ADOPTION OF A CHILD IN ISLAM

Q: "In the secular legal system, adoption of a child by couples is lawful as we all know. Please elucidate the position of Shariah in this regard. How far such an adoption is permissible in Islam, and if so, what are the rights and obligations of the parties involved in such a situation?" A: Adoption of a child has no legal effect in Shariah. One can adopt a child for his emotional and psychological satisfaction. He can treat him as his own son in the matters of love, affection and general behavior. Adoption of a child to provide shelter to him is a virtuous deed which carries much reward in the Hereafter. But so far as the legal aspects are concerned, adoption has no consequence. The child should not be attributed except to the natural father, and not to the one who has adopted him. Even in the matter of hijab adoption has no effect whatsoever. If a male child is adopted by a woman, she will observe hijab from him after he reaches the age of puberty, unless she is related to him in a prohibited degree. An adopted child can marry a daughter of his adoptive parents, because she is not his real sister. In short, adoption does not create a new legal relationship which did not exist before. All these rules are inferred from the principle laid down by the Holy Qur'an in this respect. The people in jahiliyyah used to treat an adopted child as the real one in all respects. The Holy Qur'an condemned this practice and the following verses were revealed: وما جعل أدعیاءکم أبناءکم ذ لکم قولکم بافواھکم واللہ یقو ل الحق وھو یھدی السبیل ادعوھم لا باءھم ھو أقسط عنداللہ "And Allah did not make your adopted children your sons. That is only your words coming out from your tongues. And Allah says the truth and He guides you to the right path. Call them with reference to their (real) fathers. It is more just in the sight of Allah." (Surah 33:V4) However, it should be remembered that although an adopted child cannot inherit from his adoptive father, but it is permissible, rather advisable, for him that he, in his lifetime, makes a will in favour of his adopted son. Through such a will he can bequeath upto one third of his property to his adopted child who cannot otherwise share his inheritance.[1] [1] Such a bequest to a non-heir is known as WASIYAH and must not exceed one-thirds of the estate after payment of debts.

EXCHANGE OF CURRENCIES & DISCOUNTING OF BILLS Part1

I got your comments on our group's evaluation of Islamic banks and Mudarabah companies. The MBA project we are doing is in the second week of June, 1997. Your guidance would help us in presenting the true picture of an Islamic Financial lnstitution (lFI) at LUMS. It would be quite helpful if you answer following questions: Q: (1) Why cannot currencies be sold at rates different than the market or spot rate? How are currencies of different countries different than ordinary goods which can be sold at prices different than the market? (2) Why is discounting of bills of exchange in different currencies permitted when currency itself cannot be traded below the spot rate? (3) Can one party in a 'promise to sell/purchase' agreement ask for a security, whether cash or any kind of collateral, from the other party? (4) How can an agent's (agent being the bank) fee be determined if he is made responsible to collect the amount written on bill of exchange on behalf of it's client? Wouldn't such kind of agency fee or service charge become an excuse for charging interest? How can one prevent it? (5) Is it injustice if two or more partners agree on a ratio of profit, not the loss, which is different than the ratio of capital contributed by each partner? (6) Are the following rules correct according to Shariah: a. It is permissible for the lessee to let to a third party during the lease period whether for the same rental or more, as long as the asset is not affected by the change of user. b. It is permissible to stipulate in a contract of Istisna that price would be reduced by a specific amount per day upon delay in delivery by the seller. (7) What steps can an Islamic Financial Institution take to prevent the concentration of wealth among the rich individual of a Muslim society? A: Here are the answers to your recent questions: (1) If the currencies are of the same country, they cannot be sold at a rate different from their face value. However, if the currencies are of different countries, they can be sold on spot at whatever rate agreed upon between the parties which can be different from the market rate. However, if the payment is deferred on either side, it must be in accordance with the market rate. This condition is put to restrict the use of this transaction to the genuine needs, otherwise it may be taken as a device to effect riba transaction. The details of the rules regarding the transaction of currencies are available in my Arabic book Akham AI-Auraq AI-Naqdia which has also been translated. (2) The discounting of bills of exchange even in different currencies is not permitted in Shari'ah. The reason is that a Bill of Exchange stands for the amount of the bill which is a debt payable by a seller. If it is sold or purchased for cash, it means that two currencies are being exchanged where the payment at one side is deferred and I have already mentioned in answer to question No.1 that if the payment is deferred on either side, the price should not be different from the market spot rate. (3) The promise to sell/purchase is merely a promise. It does not effect the contract of sale itself, therefore, no rights or obligations of a sale can arise out of a promise only. Hence no party can ask for security or a collateral for the fulfilment of a promise. Because the security or collateral is justified only where a liability or a debt has actually come into existence while in the case of promise no debt or liability is created. It is only an undertaking to sell/purchase a commodity in future. When the actual sale cccurs on a deferred payment basis the debt will be created and at that time it will be justified to ask for a security. (4) If the bank has been made an agent to collect the amount of a Bill of Exchange on behalf of its client it is permissible for the bank to charge a fee for this service. The fee may be determined by the parties on whatever basis they agree upon. However, it should not be tied up with the period of the maturity of the bill. With this condition this transaction will not, hopefully, be instrumental to charge interest. (5) In a Musharakah contract the parties may agree on a ratio of profit different from the ratio of their investment with the only condition that a partner who in expressed terms, relieves himself from the liability to work for the partnership cannot claim a ratio of profit higher than the ratio of his investment, for example, if 'A' has invested 60% of the capital while 'B' has invested 40% the parties can agree that 'B' will get 60% of the profit and' A' will get 40% of the profit. However, if 'B' has, in expressed terms, put a condition in the contract of Musharakah that he will never work for the enterprise, he cannot claim more than 40% of the profit. (6.a) A lessee can sub-lease the property to a third party with the permission of the lessor, if the rent charged by him from the sub-lessee is equal to the rent payable by him to the original lessor. This sub-lease is permitted with the consensus of all Muslim jurists. However, if the lessee charges from his sub-lessee a rent more than the rent payable by him to the original lessor, it is not permissible according to Imam Abu Hanifah, but it is permissible according to other Imams. (6.b) It is permissible to stipulate in a contract of Istisna that price would be reduced by a specific amount per day upon delay in delivery by the seller. The contemporary scholars of Islamic Jurisprudence have allowed this type of contract on the basis of the following ruling given by the classic Fuqaha: (و صح تردید الاجر بالتردید فی العمل) کإن خطتہ فارسی بدرھم او رومیا بدر ھمین (وزمانہ فی ال) ۔۔۔۔کان خطتہ الیو م فبدرھم او غدا فبنصفہ۔ [ردالمحتار لا بن عابدین ص ۷۲ ج ۶] (7) In fact the answer to this question requires a detailed treatise, but without going into details the following steps may be taken by the Islamic Financial Institutions to prevent the concentration of wealth among the rich of its society: Firstly, they should maximise the use of Musharakah and Mudarabah instead of Murabahah or Leasing, because the real alternative to interest in a true Islamic economy is Musharakah and Mudarabah which paves the way for equal distribution of income among the members of the society and they are very competent and strong instrument diverting the flow of wealth from a few rich people to the common lot. Secondly, they should find out ways and means to finance the small scale trade and industry. For this purpose an Islamic financial institution should rise above the level of pure commercial and material benefits and should set their priorities in wider interests of the society of which they, themselves, are an inseparable part.[1] [1] Mudarabah is a distinct class of partnership in terms of which the one party, called the rabbul maal, hands over capital to another, called the mudaarib, on the basis that the mudaarib trades with such capital and the resultant profits (if any) are shared between them in pre-agreed proportions (such as two-thirds to the rabbul maal and one thirds to the rnudaarlb).1 The essence of this class of partnership is that it is a partnership relating to profit only. The mudaarib is entitled to profit in accordance with the agreed profit sharing ratio by reason of his labour, and the rabbul maal is similarly entitled to profit as a return on his capital. It follows that ordinarily, in the absence of defined negligence and/or breach of contract, the losses of the partnership will be offset against accrued profits, and thereafter against capital. It also follows that the contract of mudaarabah will be void if the agreement stipulates that the rabbul maal must work together with the rnudaarib.2 Mudaarabah is a unique class of partnership in that it brings together both capital and labour and employs them productively in business. A person has the capital but not the skills and expertise, whereas another has the skills and expertise to conduct business but not the capital. There is therefore a genuine need to recognise such a partnership which was prevalent at the time of the Holy Prophet (SAW). He confirmed its validity and the noble companions (may Allah be pleased with them) transacted on the basis of mudaarabah. The jurists are accordingly unanimous (IJMA) in regard to its validity. 3 The contract of mudaarabah itself is concluded by offer and acceptance, or by the use of words which indicate that the parties intend to conclude a contract of mudaarabah. For example, the rabbul maal says to the mudaarib: "Take this capital (e.g. R100,000.00) for the purposes of mudaarabah, and expend labour on the basis that the resultant profits will be shared equally", or the rabbul maal says: "Take this cash and treat it as capital, and the profits will be shared equally between us" and the mudaarib accepts the offer' Upon conclusion of a valid mudaarabah contract, the following legal consequences arise and attach to the mudaarib: a) the mudaarib, in receiving the capital from the rabbul maal, is a trustee (AMEEN) in the sense that he is not ordinarily obliged to compensate the rabbul maal in the event of loss or destruction thereof. 5 b) the mudaarib, in commencing his labours, is an agent of the rabbul maal in dealing with and disposing of the property because he does so on his (the rabbul maal's) instructions as the owner thereof. 6 c) the mudaarib, if he makes a profit, shares therein by reason of his labour, and because the object of mudaarabah is to make a profit. If, on the other hand, the contract of mudaarabah is void for any reason, then the mudaarib is entitled to remuneration for his labour equivalent to the market rate. If the mudaarib breaches a valid condition of the contract of mudaarabah, then he is strictly liable to make good any loss because he has dealt with the property of another without authorisation." The contract of mudaarabah may be general without any limitation as to duration, or class of business to be conducted, or place where such business is to be conducted, or otherwise as to the category of suppliers and merchants to be dealt with. The contract however may be limited as to any of those matters. The rule in this regard is that the rabbul maal may impose any condition in the contract which is beneficial to him, and the mudaarib is bound to observe such condition otherwise he will be in breach of contract. If the condition is of no benefit to the rabbul maal, then the condition itself will be invalid without affecting the validity of the whole contract8 (EDITOR) 1. AL-MUGNI, VoI 5, Page 134 2. RADDUL MUHTAAR, VoI 5, Page 645 3. BADAI US-SANAI, Vol 6, Page 79 4. MAJALLAH, article 1405 5. RADDULMUHTAAR, VoI 5, Page 646 6. HEDAYAH, Chapter on MUDARRABAH 7. HEDAYAH, Chapter on MUDAARABAH 8. MAJALLAH, Article 1407, Commentary of Allama Itasi (RA)

WORKING IN HOTELS SERVING LIQUOR AND PORK

Q: 1. Muslim students who go to non-Muslim countries for higher education generally find out that the money sent to them by their parents is insufficient for their many needs. Thus, they take up jobs to stay even. Some times they find jobs in hotels which sell liquour and pork. Is it permissible for a Muslim student to be employed in such hotels? Q. 2. Running a distillery or merchandizing liqour or pork in non-Muslim countries are open businesses. Can Muslims also do so? A: 1. & 2. A Muslim is permitted to take a job in hotels run by non-Muslims subject to the condition that this Muslim employee does not take up the duty of supplying pork or serving liquour and other forbidden things to non-Muslims. For, making others drink or serving it to them is forbidden. According to a narration from Sayyidna 'Abd Allah ibn 'Umar, may Allah bless them both, the Holy Prophet (SAW) said: لعن اللہ الخمر وشاربھاو ساقیھا وبائعھا و مبتاعھا وعاصرھا ومعتصرھا و حاملھا والمحمولۃ الیہ Allah has cursed liquor and its drinker, its server, its seller, its buyer, its squeezer and whoso it has been squeezed for, and its carrier and whoso it has been carried to. In Tirmidhi, a narration from Sayyidna Anas ibn Malik says: لعن رسول اللہ صلی اللہ علیہ وسلم فی الخمرعشرۃ : عاصرھا ومعتصرھا وشاربھا وحاملھا والمحمرلۃ الیہ وساقیھا وبائعھا وآکل ثمنھا والمشتری لھا والمشترۃ لہ The Holy Prophet (S.A. W) has cursed ten persons connected with drinking: The squeezer of liquor and the one for whom it has been squeezed, its drinker and its carrier and the one for whom it is carried, its server and its seller and the consumer from its sale proceeds, its buyer and the one for whom it is bought. The words of the hadith narrated by Sayyidna Anas (R.A) appear almost identically in Ibn Majah as well: عاصرھا، ومعتصرھا والمعصورۃ لہ وحاملھا والمحمولۃ لہ وبائعھا والمبیوعۃ لہ وساقیھا والمستقاۃ لہ The squeezer of liquor and the one who orders its squeezing and the one for whom it has been squeezed, and its carrier and the one for whom it is carried, and its seller and the one to whom it is sold, and its server and the one who has been served with it. Imam al-Bukhari and Imam Muslim; (R.A), have narrated the following hadith from Sayyidna 'A'ishah (R.A): قالت : لما نزلت الا یات من اخر سورۃ البقرۃ خرج رسول اللہ صلی اللہ علیہ وسلم فاقتر اھن علی الناس ، ثم نھی عن التجارۃ فی الخمر She said: "When the concluding verses of Surah al-Baqarah were revealed, the Holy Prophet (S.A.W) went out of the house and recited those verses before people present there. Then, he prohibited trading in liquor.” Imam Muslim has reported the following saying of Sayyidna Ibn 'Abbas (R.A) as attributed to the Holy Prophet (S.A.W): ان الذی حرم شربھا حرم بیعھا The one who has made drinking of liquor unlawful is the one who has also made its buying and selling unlawful. And Imam Ahmad has reported the following narration in his Musnad: عن عبدالرحمن بن وعلۃ، قال : سالت ابن عباس فقلت: انا بارض لنا بھا الکروم، وان اکثر غلاتھا الخمر، فذکر ابن عباس ان رجلا اھدی الی النبی صلی اللہ علیہ وسلم روایۃ خمر، فقال لہ رسول اللہ صلی اللہ علیہ وسلم : ان الذی حرم شربھا حرم بیعھا This is a report from 'Abd aI-Rahman ibn Wa'lah. He says: 'Once I asked Sayyidna Ibn 'Abbas: "We live in an area where we own vineyards and the major source of our income there is nothing but liquor.' To this, Sayyidna Ibn 'Abbas replied, 'A certain person came to the Holy Prophet (S.A. W) and presented a leather bag full of liquor as a gift for him. Then, to him, the Holy Prophet (S.A.W) said: 'The one who has made the drinking of liquor unlawful is the one who has also made its buying and selling unlawful. " In the light of the ahadith quoted above, it becomes clear that the business of liquor is also unlawful, as is its transportation from one place to the other, or its offering for consumption. The ruling given by Sayyidna Ibn 'Abbas (R.A) also provides a clear answer to the situation in which the distilling, and buying and selling of liquor may be common local practice, still, there too, it will not be lawful for a Muslim to adopt dealing in wine as a means of his livelihood. And as far as I know, no Faqih from among the Muslim Jurists has ruled it as permissible.

order of an Islamic government binding on us?

Q: Mufti Sahib, is the order of an Islamic government binding on us? For example, when 'Eid comes, the government announces the sighting of the moon and we celebrate the next day as our 'Eid. This is an order of the Islamic government which we obey. Then, we have the order by which we were given the option of opening Profit and Loss Accounts in the banks of the country. Obviously, this action was supposed to eliminate interest. If I put my money in the bank, get whatever profit or loss it gives to me and use it, would it not be permissible for me because I am simply following the order of the government of a Muslim country? A: To obey the order of the ruler is necessary, but this has one limitation. To obey each and every order is not necessary. The rule is: There is no obedience to the created while one has to disobey the Creator. If the ruler gives an order which is against the order given by Allah, the order of that ruler will not be obeyed. In this particular instance you have cited, there is no order as such. This is just a facility provided for you. You may or may not use it. This is no law. Nobody has said that you must open a PLS Account, the contravention of which will be punishable by law.

COPYRIGHT IN ISLAM

Q; Can you please explain the Islamic injunctions about the "copyright", especially about the copyright on computer software? The questions are: (i) Can we register a book under the copyright Act which bars the people from publishing that book without the permission of the copyright holder? (ii) If something is registered under the law of copyright, should we abide by the restrictions imposed by that law? (iii)Can a copyright holder sell his right of publishing to another person for a monetary gain? (Khalid J. Akhtar, Lahore) A: The question of "copyright" is related to a wider concept, generally known as the concept of "intellectual property". In previous days the concept of ownership was confined to those tangible commodities only which can be perceived through our five senses. But the speedy progress in the means of communication gave birth to the new concept of "intellectual property" which extended the concept of ownership to some intangible objects also. The theory of "intellectual property" contemplates that whoever applies his mental labour to invent something is the owner of the fruits of his labour. If a person has invented a certain instrument, he does not own that instrument only, but he also owns the formula he has used for the first time to invent it. Therefore, nobody can use that formula without his permission. Similarly, if a person has written a book, he is the exclusive owner of the right to publish it, and nobody has any right to publish that book without his permission. This right of an author or an inventor is termed as his "intellectual property". It is also implied in this theory that the owner of such rights can sell them to others like any other tangible objects. The law of "copyright" has come into existence in order to secure such rights and to give legal protection to this kind of property. It is obvious that the concept of intellectual property on which the law of copyright is based is a new phenomenon created by the rapid progress of industry and the means of communication, therefore, the concept is not expressly mentioned in the Holy Qur'an or in the Sunnah of the Holy Prophet (S.A.W). The acceptability or otherwise of such new concept which are not clearly mentioned in the original resources of Islamic jurisprudence can only be inferred from the general principles laid down by the Shari'ah. As the views of the jurists may differ while applying these principles to the new situations, there is always a wide scope of difference of opinion in such cases. The question of "intellectual property" has also been a subject of discussion among the contemporary Muslim scholars of Shari'ah whose opinions are different about its acceptability in Shari'ah. A group of contemporary scholars do not approve the concept of "intellectual property". According to them the concept of ownership in Shari'ah is confined to the tangible objects only. They contend that there is no precedent in the Holy Qur'an, in Sunnah or in the juristic views of the Muslim jurists where an intangible object has been subject of private ownership or to sale and purchase. They further argue that "knowledge" in Islam is not the property of an individual, nor can he prevent others from acquiring knowledge, whereas the concept of "intellectual property" leads to monopoly of some individuals over knowledge, which can never be accepted by Islam. On the other hand, some contemporary scholars take the concept of "intellectual property" as acceptable in Shar'iah. They say that there is no express provision in the Holy Qur'an or in the Sunnah which restricts ownership to tangible objects only. There are several intangible rights accepted and maintained by the Shariah, and there are several instances where such intangible rights have been transferred to others for some monetary consideration. They contend that the concept of "intellectual property" does in no way restrict the scope of knowledge, because the law of "copyright" does not prevent a person from reading a book or from availing of a new invention for his individual benefit. On the contrary, the law of "copyright" prevents a person from the wide commercial use of an object on the ground that the person who has invented it by his mental labour is more entitled to its commercial benefits, and any other person should not be allowed to reap the monetary fruits of the former's labour without his permission. The author of a book who has worked day and night to write a book is obviously the best person who deserves its publication for commercial purposes. If every other person is allowed to publish the book without the author's permission, it will certainly violate the rights of the author, and the law of copyright protects him from such violation of rights. Both of these views have their own arguments. I have analysed the arguments of both sides in my Arabic treatise "Discussion of Contemporary Legal Issues" and have preferred the second view over the first, meaning thereby that a book can be registered under the Copyright Act, and the right of its publication can also be transferred to some other person for a monetary consideration. This is an answer to your question no (i) and no (iii). Coming to the question no (iii), I would like to add that if the law of copyright in a country prevents its citizens from publishing a book without the permission of the copyright holder, all the citizens must abide by this legal restriction. The reasons are manifold. Firstly, it violates the right of the copyright holder which is affirmed by the Shariah principles, according to the preferable view, as mentioned earlier. Secondly, I have mentioned that the views of the contemporary scholars are different on the concept of "intellectual property" and none of them is in clear contravention of the injunctions of Islam as laid down in the Holy Qur'an and Sunnah. In such situations, an Islamic state can prefer one view over the other, and if it does so by specific legislation, its decision is binding even on those scholars who have an opposite view. It is an accepted position in the Islamic jurisprudence that the legislation of an Islamic state resolves the juristic dispute in a matter not expressly mentioned in the Holy Qur'an or in the Sunnah. Therefore, if an Islamic state promulgates a law in favour of the concept of "intellectual property" without violating any provision of the Holy Qur'an and Sunnah, the same will be binding on all its citizens. Those who have an opposite view can express their standpoint in academic discussion, but they cannot violate the law in practice. Thirdly, even if the government is not a pure Islamic government, every citizen enters into an express or a tacit agreement with it to the effect that he will abide by its laws in so far as they do not compel him to do anything which is not permissible in Shariah. Therefore, if the law requires a citizen to refrain from an act which was otherwise permissible (not mandatory) in Shariah, he must refrain from it. Even those scholars who do not accept the concept of "intellectual property" do not hold that it is a mandatory requirement of Shari'ah to violate the rights recognized by this concept. Their view is that it is permissible for a person to publish a book without it's author's permission. Therefore, if the law prevents them from this "permissible" act, they should refrain from it as their agreement (of citizenship) requires them to do so. Therefore, it is necessary for every citizen to abide by the law of copyright unless it compels a person to do an impermissible act, or to prohibit him from performing a mandatory act under the Shari'ah.

INSTALMENT SALES OF HOUSES

Q: "The Fiqh Academy has also allowed installment sales. Does this mean that I can now buy a house in UK or USA on installments bearing in mind that each installment includes repayment of "principal" and "interest". A: Sale on installment should never be confused with a transaction of interest bearing loan. In a sale transaction subject matter of contract is a commodity which should necessarily be owned by the seller at the time of sale and should be in his possession. But in the case of loan the subject matter of the transaction is money which is advanced to the borrower. The house financing schemes generally practiced in the Western countries are based purely on interest. The banks advance money for the purchase of the house and charge interest on it. The house is mortgaged as a security for the repayment of loan. This transaction has nothing to do with a transaction of sale on installments. The house is never purchased by the bank, nor does the bank sell the house to the customer. The customer purchases the house from a third party and owes its price to him. The bank comes in only to finance the buyer on the basis of interest. Therefore, this transaction is a riba transaction which is strictly forbidden and cannot be justified on the presumption that it is a transaction of sale on installments. However, if the seller himself sells the house on installments and charges a price higher than the cash price, or the bank itself purchases the house from the seller, and after having its ownership and possession resells it at a higher price to the customer on installments, the transaction may be valid in Shariah, if the necessary conditions of sale are fully observed as mentioned in the resolution of the Fiqh Academy. But the transaction generally in vogue in the Western countries is not based on the concept of sale. It is an interest transaction pure and simple, and a Muslim is not allowed to enter into such transactions. It is thus clear that your understanding of the resolution of the Fiqh Academy is not correct.

THE CONSUMER CREDIT SCHEME

Q: It is becoming common for Muslim retail businessmen in South Africa to enter into the so-called consumer credit scheme. The retailer concerned concludes a written agreement with a third party Company ("the Company'). A copy of the specimen agreement is enclosed herewith. In terms of the scheme: a) the customer wishes to purchase such goods on credit over 6 months; b) the customer wishes to purchase such goods on credit over 6 months; c) the customer is informed that the Company may sell him such goods on credit and, for that purpose, the customer fills in a prescribed application containing details relating to his credit-worthiness; d) that application form is immediately faxed by the retailer to the Company for approval; e) the Company responds very shortly thereafter (within half hour); f) if the Company approves such application, it authorises the retailer to supply the goods so selected to the customer on credit; g) the customer then signs an agreement in the form prescribed by the Company in terms of which he undertakes to pay the Company for the price of such good in 6 monthly installments plus agreed interest. The installments may be paid directly to the Company or to the retailer concerned who as the agent of the Company pays the money so collected directly to the Company. h) the goods so selected are then handed over to the customer and the relevant completed documentation is then delivered to the Company; i) the Company thereafter within a week or the agreed time period pays the retailer the invoiced price of the goods less the agreed discount as set out in the specimen agreement between the Company and the retailer which is binding in law. The agreed discount presently is 17 ½ %. It is apparent from the scheme that two separate contracts are concluded, namely: i) a contract of sale between the retailer and the Company in terms of which the Company purchases the goods selected by the customer at an agreed price (invoice price less discount) which is paid effectively in cash; ii) a contract of sale between the Company and the customer in terms of which the Company resells such goods to the customer at the invoice price plus interest in 6 monthly installments. In the conclusion of both contracts, the retailer acts as an agent and a principal. The retailer acts as a principal in concluding his separate contract of sale with the Company in terms of the overriding specimen agreement which governs his relationship with the Company; and he acts as an agent in delivering the goods selected by the customer who is liable to the Company only for the agreed price plus interest which is payable in 6 monthly installments as aforesaid. In the result; the retailer benefits in that: a) he does not have to carry the financial risk of granting credit to the ordinary consumer; b) he makes a profit although at a lower margin: c) he does not have to borrow money on overdraft to fund the granting of credit. The Company which is wholly non-muslim and financially sound, benefits by making a profit in terms of its instalment sale with the customer concerned. The scheme appears to be an application of the murabahah principles and your considered fatwa is urgently appreciated by the Jamiatul Ulema, Natal. (M. S. Orner, South Africa) A: I carefully studied the question concerning the consumer credit card and the annexed documents. The question you have formed does not reflect the correct position as emerges from the agreement forms annexed to the question. A careful study of the agreement forms reveals that this transaction is totally different from the murabaha transactions of the Islamic banks. In case of murabaha, the financier purchases a commodity, and after having its constructive or physical possession, sells it to his customer on deferred payment basis. On the contrary, the "Company" in the case of consumer credit card, does not purchase the commodity. It simply gives a loan to the customer / consumer on interest, but instead of giving the loan to the customer himself, it settles the invoice value of the commodities purchased by him from the merchant / the retailer. In other words, the company pays to the merchant the price owed by the customer / consumer. This is clear from the very first sentence found in the "merchant agreement" form which reads as follows: "Consumer Credit corporation ltd. (CCC) undertakes to provide finance to the merchant's customers and settle the Merchant's invoice value less the discount due to CCC directly to the Merchant." Thus the relationship between the Company and the customer / consumer is one of creditor and borrower. There is no sale affected between them. That is why the customer has been named a "borrower" in form I side B, which is a form of agreement between the company and the customer. It is then evident from both of the forms that the company advances a loan to the customer and charges interest thereon (see clause 5 of form I side B). However, the company has made the retailer liable for collecting the installments of repayment from the customer and for paying the same to the company within twenty four hours. The retailer has also been made liable for interest if he delays in payment after receiving the amount from the customer. But all these conditions do not change the relationship of a borrower and lender between the company and the customer. As for the relationship between the Company and the merchant, it is a complex relationship according to the agreement which includes the relationship of agency, indemnity and, in certain situations, of money lending on the basis of fixed interest. Such a complex relationship is totally against the parameters of Shariah. Moreover, the provision of interest in case of late payment renders the whole transaction invalid according to Shariah. Therefore, the scheme of the consumer credit card, as envisaged in the annexed agreement forms in undoubtedly an interest bearing scheme which cannot be held as valid according to Shariah, nor can it be validated on the analogy of the murabahah transaction, because there are a number of basic differences between the two transaction. So, I have no doubt in my mind that it is not permissible in Shariah to become a party to this transaction. This "Consumer Credit card" is substantially different from the general credit cards issued by several companies like American express, visa etc, where no interest is charged by the company from the card - holder. So, the "Consumer Credit card" in question should not be confused with the general credit cards issued by American express etc. which can be permissible subject to certain condition.

Interest

Q: I have some interest credited to my account from my days of ignorance. However, I intended to give away this interest money by the end of this year. However, as you know, BCCI has been closed in UK and it is unlikely that we will get full refund of our deposits with them. My deposits consists purely of my own money. Can I adjust some of previously received interest against the loss of my own money in BCCI? If not, can you suggest some other way order to reduce my losses. (Ibid) A: Yes, in this case you can adjust the interest money received earlier against the loss of your principal. The money you have deposited in the bank according to Shariah, is a loan advanced to the bank. You are entitled to receive it back in full. If the same bank has given you some amount in the name of interest, but has refused later to return your principal in full, you can treat the interest money received earlier as part payment of the principal and can use it for your own benefit to the extent of the total principal deposited by you in the bank. This ruling is based on the general principles of Shariah and on a Fatwa of Maulana Ashraf Ali Thanwi given by him orally and published in a collection of his discourses named "AI-ifadatul yaumiyyal" v.6 p.20 para 32. [1] [1] It is apparent from the answer that the interest (which is really repayment of capital) must have been received from the same bank in which the original deposit of capital was made. (EDITOR)

ADJUSTMENT OF INTEREST AGAINST THE LOSS OF PRINCIPAL 1

Q: In response to my question, you have replied in the Albalagh International- November 1991 issue - that I can adjust the interest money received earlier against the loss of my principal amount in BCCI, your reply, I assume, is based on the assumption that I want to adjust the interest received earlier "FROM BCCI" against the expected loss of principal amount deposited with BCCI. Suppose the interest was not received from BCCI or only partly received from BCCI. Now the question is that can I adjust such interest amount against the loss of principal in BCCI? (M.S, Desai, Saudi Arabia) A: As I have mentioned earlier whatever amount you have received or you expect to receive from BCCI, in whatever name it may be, you can take it as the part recovery of your principal, but it should be kept in mind that your total receipts from the bank should not exceed, in any case, the amount you have actually deposited in the bank. Therefore, if the bank agrees, at a later stage, to pay you more, your claim should be confined to the extent of the arrears of your principal deposit only without any excess thereon.

ON FISCAL LAWS

Q: What is the deifinition of Riba (ربوا) according to the Holy Quran and Sunnah of the Holy Prophet (S.A. W). Does it cover the simple and compound interest existing in the present day financial transactions? A: The word, Riba as understood from the Holy Qur'an and Sunnah, is any extra payment received over and above the principal amount, regardless of the fact that that extra amount is significant or insignificant. Islam, therefore, considers the Riba Haram, in all of its forms The Fuqaha have given two interpretations of the word, Riba,: Riba-al-Nasia (ربا لنسیۃ) and Riba al Fadl (ربالفضل). Riba al-Nasia is defined as, ھو القرض المشورط فیہ الاجل و زیادۃ مال علی المستقرض Which is translated as: "Any lending arrangement that obligates the borrower to pay a certain extra amount over and above the payment of the principal amount against the specified deferment". Similarly, Imam Baihaqi reports the interpretation of Riba by Hazrat Fuzalah Ibni Ubaid (R.A): کل قرض جر منفعۃ فھو من وجوہ الربا "Any lending arrangement which results in some benefits to the lender, is one of the kinds of Riba". It is important to note that the Ayahs of Holy Qur'an prohibiting interest relate to Riba al-Nasia. "O Ye who believe, fear Allah and give up what remains of your demand for usury, if Ye are indeed believers" (al-Baqara 278). "If Ye do it not, take notice of war from Allah and his Apostle, but if you desist, Ye shall have your capital sum: Deal not unjustly, and Ye shall not be dealt with unjustly". (al-Baqara, 279) At the time of revelation of the above Ayahs, the prevalent form of Riba was Riba al-Nasia. Therefore, the companions of the Holy Prophet (S.A.W) understood the meaning of these Ayahs in terms of Riba al-Nasia. Thus Riba al-Nasia was categorically regarded Haram in matters of Qarz. (Loan transactions QARD) Riba al-Fadl occurs in those commodity exchange contracts where a contract provides payment of any extra quantity of the commodity. For instance, one kilogram of wheat is exchanged for more than one kilogram of wheat, regardless of quality consideration. What matters is, that a given quantity is to be exchanged for the same quantity. In this case, the Hadith of the Prophet (S.A.W), الذھب بالذھب مثلا بمثل، والفضۃ بالفضۃ مثلا بمثل، والتمر بالتمر مثلا بمثل، والبر بالبر مثلا بمثل، والملح بالملح مثلا بمثل، والشعير بالشعير مثلا بمثل، فمن زاد أو ازداد فقد أربی، بيعوا الذھب بالفضۃ كيف شئتم يدا بيد، وبيعوا الشعير بالتمر كيف شئتم يدا بيد Sell gold by gold, silver by silver, dates by dates, wheat by wheat, salt by salt, and barley by barley like for like and equal for equal so he who made an addition or who accepted an addition, committed the sin of taking interest. But sell gold for silver as you like but hand to hand and sell barley for dates as you like but hand to hand. Though the above Hadith mentions the incidence of Riba in six things but the Fuqahah have extended the application of this Hadith to all commodity transactions characterized by the same underlying reason. Whenever the same commodity is exchanged for more (Quantity), the Riba al-Fadlwill arise. In the light of above explanation, it is clear that the word 'Interest' as commonly understood in context of banking/financial pertains to the Riba al-Nasia. Therefore, any extra payment specified in Qard relating contract over and above the principal amount, falls under the definition of Riba, al-Nasia, irrespective of the rate/amount of the extra payment. Hence, both the Simple and the compound interest are prohibited as being Riba al-Nasia. Some people, perhaps have misunderstood the meaning of the verse, "O ye who believe, devour not usury doubled and multiplied but fear Allah that Ye may (really) prosper" (3: 130) And have tried to argue the permissibility of the simple interest. This is totally wrong conclusion. As a matter of fact, the Holy Qur'an wants to root out an interest mentality as appears from verse (2:279). Ibn-e-Jareer has reported the interpretation of Hazrat Qatada (RA) in his tafsir. ما کان لھم من دین فجعل لھم ان یا خذوا رؤوس اموالھم ولا یزدادوا علیہ شئیا "That the Holy Qur'an permits the lender to receive the principal amount only and does not allow any addition (however small it may be) ".