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Business / Trade / Finance

Sep 17, 2007


Q. Can one sell ornaments with photos, statues of people, animals, etc?

A. It is not permissible to sell such items.

Q. Can one buy and thereafter auction goods?

A. Yes.

Q. Please can you let me know if it is permissible for a Muslim to engage in a business that manufacturers coffins?

A. Yes, it is permissible to manufacture coffins. One should however abstain from manufacturing any sign or symbol that identifies with another religion.

Q. I am a businessman involved in a manufacturing sector, for example, I make a product… Some of my customers are willing to pay me an advance payment for the item, though I do not have the item in stock. However I do have raw material to make it. Is it permissible for me to receive the advance payment?

A. Yes, it is permissible for you to receive advance payment. This type of arrangement is called Istisnaa. Istisna is the kind of sale where a commodity is transacted before it comes into existence. It means to order a manufacturer to manufacture a specific commodity for the purchaser. If the manufacturer undertakes to manufacture the goods for him with material from the manufacturer, the transaction of Istisna comes into existence. But it is necessary for the validity of istisna that the price be fixed with the consent of the parties and that necessary specification of the commodity (intended to be manufactured) is fully settled between them.

The contract of istisna creates a moral obligation on the manufacturer to manufacture the goods, but before he starts the work, any one of the parties may cancel the contract after giving a notice to the other (*Ibn Abidin, Radd-ul-Muhtar v5, p 223). However after the manufacturer has started the work, the contract cannot be cancelled unilaterally. (Islamic Finance – Mufti Taqi Usmani)

Q. I own a butcher and sell meat as a wholesaler. Normally, I phone my clients giving them the type of animal, grade, weight and price per kilo. The sale is done over the phone. However, they only pick up the meat at a later date. Naturally the carcass loses weight. Who bears this loss? If it is the sellers loss, how do I overcome this?

A. This is the loss of the seller. The buyer has a choice, either to take the carcass and pay according to the present weight at pick-up or to cancel the sell. The simple solution to your problem is to sale the carcass as a whole and not per kilo. You will notify the customer about the type of animal, it's grade, approximate weight and price of the whole carcass.

Q. Consumer Credit seems to be the only way out for small businesses in order for them to survive in todays turbulent times. Could you kindly investigate this matter and state whether it would be permissible or not?

A. The modus operandi of the Consumer Credit is something along these lines: – A customer wishes to purchase an item on credit. The dealer cannot afford to give him the item on credit, so he (the dealer) hands over the customers account to a Consumer Credit (Corporation who CAN afford to carry the customer on a credit basis. In order to do this, the customer fills in a Consumer Credit form with all his personal details. The Consumer Credit Corp does a routine check on the customers credit-worthiness and then sanctions the credit transaction. Once the transaction is passed, the customer pays a small deposit for the purchased item to the dealer. The balance owing on the item is paid to the dealer by the Consumer Credit Corp and the dealer is satisfied as he has got his full money. The Consumer Credit Corp then retrieves from the customer the money that it paid to the dealer, but with an admin fee and with interest added on. An example follows:-


Price of item R 200, 00
Less Deposit 10% R 20,00
Sub Total R 180,00
Add: Admin. Fee 27,5% R 55,00
Add: Interest 9,5% R 19,00
Total Sum Owing R 254,00
Payable in 6 Instalments of 20,94 each.


From the above details, it can be concluded that the modus operandi of the Consumer Credit Corporation is in conflict with Islamic Shari'ah. First of all, the dealer (retailer) becomes a link in an interest-based transaction due to the fact he hands over his customer to the Corporation who in turn charges that client 9,5% interest on the balance owing. Secondly, the Consumer Credit Corporation also adds on an Administration charge of 27,5% onto the gross invoice value which goes into its coffers. Although the Corporation terms it as an "Admin. Fee", it also basically boils down to an illegal gain and profit. Why should the Credit Corp. get a profit from every sale transaction of the dealer when it has no share or partnership in the dealer's business? A normal Admin. Fee should be standard as the procedure and work (supplying the Consumer Credit application form and processing it) is the same in each transaction. By allocating a percentage (27,5%), the Credit Corp. reaps a profit which escalates in proportion with the volume of the sale transaction. Furthermore, the operation of the Credit Corp is basically what is in Shari'ah as "Hawalah." i.e. an agreement whereby the debtor (the customer) hands over the responsibility of his debt to a third party (in this case, the Credit Corp), with the understanding that. the third party wi1l settle. the debtor's debt promptly and then recover it later from him. In Hawalah, the "Muhtaal Alaih"; i.e. the third party that takes responsibility of settling the debt can recover from the "Muheel" (the debtor) ONLY that amount which the "Muhtaal Alaih" had settled on his behalf, not a cent more. In this case, the "Muhtaal AIaih" is taking 37% more from the "Muheel"; i.e. the 9,5% interest PLUS 27,5% Admin Fee. This type of Hawaalah will he illegal and the dealer (shopkeeper) is party to it. Hence, such a system will not be permissible.


By sanctioning the system and handing over his customer to the Consumer Credit Corporation's interest-bearing transaction, a Muslim shopkeeper will be indirectly assisting and aiding in the promotion of a Haraam business; whereas assisting in the promotion of a Haraam (unlawful) cause has been expressly and categorically forbidden in the Holy Quraan. It is stated in Chapter 5, Verse 3 of the Holy Quraan:- "Help ye not one another in sin and rancour." (AI-Quraan, 5:3 )


Recently, the Consumer Credit organisations have slightly charged some terminology in order, to apparently appease and accommodate those Muslim dealers who distanced themselves from this scheme due to the interest factor. Now, instead of enumerating the 9,55% interest and the 2'7.5% Admin. charges separately; they combine both and term them as a 40% "period rate." The terminology may have changed, but in my view, it in reality still encompasses the interest rate of 9,5% in lieu of the extra PERIOD and GRACE allowed to the customer for settling the debt, which explains why it has been termed a "PERIOD RATE."


Rizq, as we know comes from Allah Ta'aala. So why should we harbour the notion that by NOT getting payment immediately (via the infrastructures of Credit Corps.) the business will close down. If every Muslim had firm Yaqeen in the fact that Rizq comes from Allah Ta'aala and, at the same time he acquainted himself with and implemented the Islamic Rules that govern business, his business would thrive beyond his wildest dream.


Q – An item is haraam for consumption for a Muslim. Would it be allowed to give such an item to a kaafir or an animal for consumption?

A – Any item that is Haraam for a Muslim's consumption can not be given either to a kaafir or an animal. This can be corroborated with a fundamental principle in Ad Durrul Mukhtaar: "That which is Haraam for oneself to wear or drink, will also be Haraam to let others wear and drink." (Jadeed Ad Durrul Mukhtaar, vol.6,pg.363)

In Fatawa Aalamgiri it is stated : "If a person's tooth has to fall into a container of wheat and get grinded with the wheat, it will neither be permissible to eat that flour oneself, nor will it be permissible to feed it to animals." (Fatawa Aalamgiri, vol.5 pg. 336)

It is also mentioned in the same kitaab: "It is not persmissible for one to give wine to one's non-Muslim father to drink, nor will it be permissible to pass a glass of wine to him." (Ibid, pg.341)


Q – What is the position of insurance in our present times ? A working class person is hijacked off his car or his house is ransacked, he does not possess the means to replace them, does Islam permit being reduced to a beggar without adopting any means? What schemes can be adopted for the permissability of Insurance if there is a possibility for this?

A – All forms of insurance (be it life insurance or short term insurance of property or motor vehicles), are not permissible. The reason is that there are two Haraam ingredients involved in insurance schemes, one being interest and the other, gambling. The interest aspect comes in when, after paying a minimal amount of premiums, a substantially greater amount is received to cover one's losses. The gambling aspect comes to the fore due to the fact that insurance is like a game of chance: if you suffer a loss in your property or vehicle, you would receive a monetary kickback from the insurance company that would be far in excess of the premiums paid in by you. If on the other hand, there is no loss sustained, then instead of receiving something back, you would have to forfeit the entire premiums that you paid in.

One should forget about getting involved in such prohibited forms of insurance and place one's trust in Allah Ta'aala with the firm conviction that only He will protect one's assets and sort out one's financial commitments. A Mu'min should place his assets in the protection and trust of Alla Ta'aala and not look towards infrastructures established by the kuffaar whose only purpose is to deplete the hard-earned money of the unsuspecting masses and to make the poor poorer and the rich richer.

Note: The only scheme of "insurance" that could be viable in islam is that in which Muslims remain totally independent of the kuffaar insurance schemes and pool their resources together by contributing towards a fund, with each member giving mutual consent for his contribution to be utlised to relieve the plight of any contributor/s of the scheme who may be caught in some financial difficulty. In this way, money from the collective pool may be used to relieve the afflicted person's loss. The main pivot in the success of this scheme is the mutual consent of each contributor for his contribution to be utilised for alleviating the need of a fellow contributor. The contributions could either be kept as is in a pool, or they could even be invested (with the consent of the contributors) in a Halaal profit-generating business so that the capital outlay is boosted, thereby offsetting the effect of inflation.


Q – A Muslim owns a business property and receives an application from a liquor store owner for trading space. Is he allowed to let to the liquor store owner? If he has let to the liquor store owner, will the rental received be acceptable?

A – In terms of Islamic Law, it will NOT be permissible for a Muslim to lease out his property to anyone while knowing that the lessee will be conducting such a business on the property which is considered Haraam (unlawful) in Islam. Just as the consumption of liquor is Haraam in Islam, so too is its selling and purchasing also Haraam. By leasing out his property to a bottle store, a Muslim lessor will be indirectly assisting in the selling and purchasing of liquor; whereas assisting in the promotion of a Haraam (unlawful) cause has been expressly and categorically forbidden in the Holy Quraan: "Help ye not one another in sin and rancour". (Al Quraan, 5:3)


It is further stated in the books of Islamic Jurisprudence : "If a non-Muslim hires premises from a Muslim for the purpose of selling liquor, then this will NOT be permissible as this (leasing for such purpose) is an act of sin." (Al Mabsoot Lis Sarakhsi, vol.16, pg.38)


In this case, as the Muslim lessor is wilfully entering into a Haraam lease agreement, the rental thereby received will not be acceptable and thus should be given away in charity to the poor.


Q – Coin collectors advertise large amounts of money in exchange for certain coins minted in certain years. Is it permissible to exchange such coins for the money offered?


A – If the coins advertised are coins of another country other than ours, for instance, rare American Dollars or British Pounds, etc, then it would be permissible to sell or purchase such currency with a currency of a different country such as with South African Rands, even though large amounts of money change hands in exchange for such coins. Similarly, if the coins are of a currency that was in circulation in this country previously but was subsequently discontinued and declared obsolete. For instance the Pounds, Shillings and Pence that were in circulation in this country upto the early sixties, then it would be permissible to sell or purchase them for Rands and Cents, even if their original face value is far less than the present value being offered for them in Rands.


However, if the coins that are in demand are of a currency that is currently prevalent and in circulation; for instance if one is offered a great amount of Rands for a South African 50c coin minted in a certain year, then it would NOT be permissible to accept any amount of local currency that exceeds the face value of the coin which is only fifty cents; as the buylng and selling of a prevailing currency done against the same species of currency without equity and parity is Ribaa, i.e. usury, which is Haraam. Thus, to accept R400 for a fifty cent coin-will be prohibited. On the other hand, if the opposite party is prepared to pay another currency in exchange for the 50c coin, for example, he offers $100 Instead of R400, then It would be permissible to accept the 100 American Dollars in exchange for the coin as American Currency is NOT the normal circulated currency of our country.


Q. Can I rent out my property to a casino operation;e.g. slot machines etc.?

A. No, it is not permissible to rent out your property to a Casino operation. This is the view held by the jurists as mentioned in "AlMabsoot" vol.16 pg.38. This view is clearly proven from the Qur'aan, where Allah Ta'aala says: "And do not help each other in sin and transgression". (Surah Maidah verse no.2). Because of this ayah, it is not permissible to be a means of sin in any way. In this case you are going to be means of sin for those who operate the casino and those who utilize it.

Therefore, you should not lease your property to them.

Q. Can I rent out my property to a non muslim butchery selling haraam meat?

A. No, due to the very same reason. The meat is Haraam in terms of Shari'ah, so it's sale is also Haraam. Therefore, renting out the property for this is also prohibited.

Q. What should my response be to a family member renting out his property to a casino operation if he repays my loan from such income?

A. If you definitely know that the money he is repaying you with is the income of this unlawful leasing of his property, then it will not be permissible for you to accept it. It is not a matter of mere income (which is the response you receive), it is in fact unlawful income. If you are not sure that the repayment of the loan is being made from the rental income (such as for instance, if the family member also has many other Halaal sources of income), then it would be permissible for you to accept.

Q. Does Islam accept the time value of money? If so, then how is it priced i.e could we link it to the inflation rate (CPI) etc.?

A. No, Islam does not entertain the time value of money as being regarded as valid. Hence, if a sum of money is outstanding or owing by a person for a lengthy period of time, then too, at the actual time of payment he will only be responsible to reimburse the original owner the initial sum borrowed to him or outstanding by him and not in excess thereof. However, if the person out of his own accord wishes to give the owner a sum of money as a gift in consideration of the time value of the sum of money, then it will be appropriate for him to do so though not binding upon him.

Q. It is now happening that in many businesses, when transactions are made on credit and in big amounts, with unforeseen circumstances goes insolvent. In this case, the creditor loses out in huge amount. For this reason, the creditor asks for insurance policies from the debtor to secure the debt. Is the taking out of this insurance for the debtor to continue his business permissible?

A. The debtor will not be permitted in this situation to take out an insurance policy to secure his debt. He will rather be advised to minimise his credit transactions thereby avoiding the need for such a warranting.




Prime Spot!!!


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