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Time for a New Song

“London’s Burning, London’s Burning”
“People Crying, People Dying
“Shariah! Shariah!”
“Call on Allah, Call on Allah”

On a recent internet forum there was the usual discussion of when Ramadan should begin in the UK. Those (like myself) who propose basing it on a confirmed sighting of the moon within a suitable defined geographic region, were seen as courting controversy. Of course, such criticism often comes from those who want to “modernise” Islam or from aspiring orientalists.

However, that’s not the real controversial view. The thing some of our critics will really baulk at is the fact that I can categorically state that we do actually have the answers to transforming societies for the better. The answers are all there within the deen of Allah and Sunna of His Messenger, may Allah bless him and grant him peace. So it will be a difficult pill to swallow for some.

It’s clear that critical issues that need to be addressed are enterprise & employment, monetary policy, real local leadership, critical education and social justice.

So this is a call to all Muslim activists, to get in touch and work with us to start with ourselves and begin to transform the societies where we live. This is a call to action!

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Muslims in Support of Marks & Spencers (or maybe not)

A few days ago i was sitting in the Mosque, just after one of the prayers, having a conversation with some fellow worshippers. If you had seen us you might have described as a black Jamaican, two white Englishmen, an Eritrean and a Sudanese. Of course that is all irrelevant, as is the fact that we were talking about the historical significance of Ethiopia, or the fact that we were joined by a man of Bangladeshi origin. However, it just helps paints the picture and give a sense of anticipation.

The latest addition to the circle added his own input to what he knew about about Ethiopia (quite a lot as it happens) and then steered the conversation to what was foremost on his mind. he was concerned about some Muslims preaching hatred of the kuffar (non-Muslims). he felt that we should appreciate the good that is dome by countries like the UK and USA in terms of the aid they give to poor countries. I acknowledged that some humanitarian aid is of course very useful. Of course he couldn’t have known that some time back I delivered a lecture on the very topic of the negative impact of foreign aid on African countries. In a nutshell, my argument was that governments that rely on aid (often called “hand over of natural resources bribe money”) then have no need to rely on raising revenue from the people of the country so therefore do not invest heavily developing the infrastructure of the country. This means very little development of roadways, markets, manufacturing, telephone networks or the internet. In contrast, a lot of money is spent creating government jobs for supporters, (so a huge civil service), gifting mining contracts to friends of donor countries, and a huge army to protect the income stream.

Our sixth man then went on to condemn those that suggest Muslims should boycott Marks & Spencers (huge department store/supermarket chain in the UK). Supporters of such an action suggest that either all or a significant chunk of M&S’s Saturday takings are sent to support Israel, or in particular, to support the exploitation, brutality and “murder” of Palestinians by jews. No doubt we will all have our views one way or another on all parts of that statement and I offer no proof one way or another in this article about what that company does with “it’s” money.

Back to the sixth man. His contention was that such a boycott was ill-advised because M & S offer very good quality food, clothing and other products for sale at very reasonable prices, so where else was one to go for such service?.

Many people of my generation would have been staunch and active supporters of boycotting South African goods in protest against the apartheid regime in that country.Of course the difference was that, at least on the face of it, the UK and other governments supported at least some action against the regime (despite all the backdoor dealing that was really going on). Today, however the UK, USA and other governments bend over backwards to turn a blind eye. Yet the actions carried out and the brutality inflicted by Israelis on Palestinians is second to none, as they continually take barbarity to another level.

My reply to our companion was not to suggest that Muslims should (or indeed should not, boycott Marks & Spencers). The point I made was that for a number of reasons Muslims should indeed think about where and how they spend there money. I also pointed out that if the pillar of Zakat were implemented properly it would result in huge cash flows from the richer to the poorer Muslims in the UK. It would empower communities and lead to a whole host of social benefits. I made a point of pointing out that helping communities and individuals abroad is a great and noble act of sadaqa/charity that should continue, but that if we call it Zakat we are denying the true nature and practice of one of the great secrets Allah has given us.

The other point is of course that Palestinian Muslims are now becoming a minority. It is the shia who seem to be in control as well as large christian factions. Indeed it is the Muslims who seem to be suffering most across the Arab world despite appearances.It is hard for a non-Muslim to grasp the fact that Tunisian, Iraqi, Algerian, and Syrian governments could really be Anti-Muslim. In fact it’s hard for many Muslims to grasp that.

The truth is that our Creator, Allah, has given the Muslims all the answers to today’s problems, but we have to recognise it, want it, and as much as possible put it into place. It is precisely this attitude that the sixth man showed that has taken the deen away from the land of the Arabs.

Now, what we really did not get into was the concept of the Islamic/Open market in a community, but perhaps another time. The key thing is that whether individuals make the choice or not to be selective about where they spend their money, there is a much bigger picture to think about which is NOT about the convenience and price of my nylon underwear or ready made fish pie. It is about Muamalat

Success is only by Allah.

Statement On the Shariah Currency and Legal Tender

STATEMENT FROM IMAM HAJJ ABDALHASIB CASTINEIRA
Shariah Counselor of World Islamic Mint and Former Imam of the Great Mosque of Granada
Kuala Lumpur, 16th of August 2010
(posted courtesy of Gold Dinar & Muamalat Blog)

Bismillah irrahman irrahim
Regarding the matter of the Gold Dinar and Silver Dirham and Legal Tender in Malaysia

The Gold Dinar and Silver Dirham known as Shariah currency or Shariah coins in the Fiqh are not legal tender. The Shariah currency has no relation to present fiat currencies on many accounts and should not be legally or practically be compared or treated as the same. The Gold Dinar and Silver Dirham relates to religious matters, most important of which is the matter of payment of Zakat, rather than constitutional matters. Its introduction can only occurred on voluntary basis since freedom is a command from Allah in all commercial transactions including the acceptance of money. Its usage has been throughout history open to Muslim and non-Muslims alike.

All Praise is due to Allah, the most Compassionate, the most Merciful, the Lord of all the worlds, the King of the Day of Judgment, Who has gathered all knowledge in His Essence and Who is the Creator of all knowledge for eternity. All peace and blessings be upon His beloved Prophet, Muhammad, who was not taught by man but by Him, He was the last and most honored Prophet, the last in the chain of prophethood that was brought to this world and has guided us to the right path. May abundant peace and blessing be upon his Family and his Companions, who were chosen among the good and benevolent.
In relation to the present concern of the people regarding the Launching of the Shariah currency in the State of Kelantan on the last 2nd of Ramadhan 1431, as a witness of the momentous ceremony of the Launching in the city of Kota Bharu and as Shariah Counselor of World Islamic Mint, I would like to state in a manner of clarification and support to this initiative the following:

1.- The Gold Dinar and Silver Dirham are not legal tender. Legal tender or forced tender is an offered payment that, by law, cannot be refused in settlement of a debt, and have the debt remain in force. Personal cheques, credit cards, debit cards and similar non-cash methods of payment are not legal tender only the notes and coins of Malaysia are Legal Tender. The issuing of Legal Tender is the exclusive prerogative of the Federal Government and the Government of Kelantan never had nor has the intention to issue Legal Tender as that is legally impossible.
2.- The Dinar and the Dirham are known in the fiqh (see [a] Muqaddimah of ibn Khaldun) as the “Shariah currency”or “Shariah coins”. The term “Shariah coins” is specific to the Dinar and Dirham and is not applicable to any other coin made in gold, silver or any other material. Any other coin is known as “non-shari’i” (ibn Khaldun).

3.-Properly speaking the term “alternative currency” is not applicable to the Shariah coins or currency because the term “Shariah coins” is specific to the Dinar and Dirham and therefore is not alternative to any other coins or currency (non shari’i). It stands on its own without alternative. The use of the expression “alternative currency” can only be used if proper explanation is given in regards to the fundamental differences that exist in relation to the legal tender currencies such as the Malaysian Ringgit. The Malaysian Ringgit is an entirely different legal concept and has different functions. The Malaysian Ringgit is not based on a commodity (in Arabic ‘ayn, meaning tangible merchandise) like the Dinar and Dirham, the Malaysian Ringgit a promissory note (in Arabic dayn, meaning debt or liability) with no intrinsic value (its value as ‘ayn/tangible merchandise is the value of the paper close to zero) but with a fiat value which established by the compulsion law of the Federal Government through the Law of Legal Tender and it can change from time to time. On the other hand, the value of the Dinar and Dirham depends entirely on the market value of the commodity (gold and silver) on which it is manufactured, just like a kilo of rice depends on the value of rice. This difference in important in religious terms, for example, zakat which is a legal obligation of the Shariah has to be paid in ‘ayn but cannot be paid in dayn. (see [b] Al-Kasani). Muslims should, if having the choice(if no choice is given or no ‘ayn is available then darurah, that is exceptionality, is temporarily applicable), pay with ‘ayn rather than dayn.

5.- In linguistic sense, the Dinar and Dirham are not face values, but names that indicate specific weights. The Dinar is a specific weight of 4.25 grams and it is also known as mithqal in Arabic. The Dirham is a specific weight of 2.975 grams or 7/10 of the mithqal. In a way they are legally the same as saying “1kg of rice”. Therefore they are specific weights of commodity (gold and silver) which are mentioned in Qur’an and in many aspects of the Shariah regarding zakat and legal judgments; and thus they cannot be altered in their weight.

6.- In history, the Shariah coins has never been legal tender. In the practice of the early Muslim community the Shariah coins were not only currency used as means of payment. Barley, dates or salt were also used as means of payment and therefore no exclusive right was given to the Shariah coins. The reason for this “freedom to choose the medium of exchange” is that money is considered a part of trading it is regulated under the same Qur’anic injunction that regulates trade: “tijaratun ‘aan taradim minkum”, the meaning of which is “trade according to mutual consent”. “Mutual consent” excludes the idea of compulsion or monopoly in regards to trading. (see [c] Tafsir al-Jalalayn). This is another reason why the Dinar and Dirham are not legal tender and have never been legal tender. Freedom to choose the medium of exchange is a fundamental right granted by Allah to Muslims and non-Muslims alike. The use of the Shariah currency is therefore inclusive of non-Muslims.

7.-The term “currency” is commonly understood as legal tender or as fiat money that carries a face value. Since the “Shariah coins” are not legal tender and do not have a face value the” Shariah coins” should be better understood as a commodity rather than as “currency” in the common use of the term. Regarding current common practices, the use of the “Shariah coins” belongs to the category of barter, that is, the mutual exchange of products and services. It is arguable that in the past, before the introduction of legal tender laws, transactions made with gold and silver were consider normal transactions and the term barter was applicable to all other transactions. Therefore the use of the term “Shariah currency” should be understood with the limitations explained above and in consideration to the historical practice of the Muslims as it is relevant in the Islamic Jurisprudence.

8.- Until very recently in history “paper currencies” were defined as promissory notes in terms of gold and silver. In that sense they represented an ‘amanah’ (trusting wealth to someone who will keep it for you until you demand it) that is an obligation to pay on demand a certain amount of gold and silver. We know from history that this obligation was often not fulfilled and eventually the governments of the world decided gradually to eliminate the obligation to pay in specie altogether. The closest case of the default is the US dollar and its unilateral decision to break their “Bretton Woods Agreement”. This concept of ‘broken amanah’ is known in the Qur’an and carries legal implications as to the prohibition to accept amanah from non-Muslims unless they live under Muslim rule so that they can be obliged to pay their contractual obligations (see [d] Qadi Abu Bakr ibn al-Arabi). This legal injunction, which in theory implies the prohibition to accept British pounds, US dollars, etc. ( or any other currency backed by them), has been abrogated long ago since the colonial days by new laws that consider that this legal injunction is no longer applicable. Under the inspiration of the colonial legal systems, the constitutional Law of all Muslim countries including Malaysia grants the right to accept foreign promissory notes from non-Muslim countries (such as USD) to their own Central Bank (Bank Negara) as a reserve value for their own fiat currency. Because of this many Muslims (and non-Muslims) still mistakenly belief that their own fiat currency is backed by gold and silver when in fact no legal tender in the world is fully backed by specie anymore. The gold dinar and silver dirham are commodities and therefore they are not an ‘amanah: they are a tangible commodity (‘ayn), that is, when you pay with them, you hand over a certain amount of gold and silver and therefore they do not require to be backed by any other asset or authority other than itself. This is another reason why the Shariah currency cannot be compared or considered an alternative to “paper currencies”.

9.- Legal Tender is often a misunderstood concept. Coins and banknotes do not need to be ‘legal tender’ in order to be used as money to buy and perform other transactions for which money is intended. Legal tender must be accepted to settle a money debt. For example, US federal law does not restrict private businesses, persons or organisations in what methods of payment they choose to accept or refuse. Businesses are therefore free to insist on payment by credit card, for example, or to refuse larger denomination banknotes. In Canada for example, only Canadian dollar banknotes issued by the Bank of Canada are legal tender; however, commercial transactions may legally be settled in any manner agreed by the parties involved. A significant amount of business in Canada is transacted in United States dollars, despite United States currency not being legal tender. Legal tender can be refused unless or until a person is in debt, therefore vending machines and transport staff do not have to accept the largest denomination of banknote for a single bus fare or bar of chocolate, and even shopkeepers can reject large banknotes. However, restaurants that do not collect money until after a meal is served (a debt has been created) would have to accept any legal tender. The right of a trader to refuse to do business with any person means a purchaser cannot demand to make a purchase, and so declaring a legal tender other than for debts would be redundant.

10.- The minting of the Dinar and Dirham is a known practice of the Muslims from the early days of Islam. The first dated coins that can be assigned to the Muslims are copies of silver dirhams of the Sasanian Yezdigird III, struck during the Khalifate of Uthman, radiallahu anhu. These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading “in the name of Allah”. Since then the writing in Arabic of the name of Allah and parts of Qur’an on the coins became a custom in all minting made by Muslims. In the year 75 (695) the Khalif Abdalmalik ordered Al-Haddjadj to mint the first dirhams, officially establishing the standard of Umar ibn al-Khattab, radiallahu anhu: 7/10 of the mithqal. The next year he ordered the dirhams to be minted in all the regions of the Dar al-Islam. He ordered the coins to be stamped with the sentence: “Allahu Ahad, Allahu Samad”. The minting of the coins is considered an obligation of the Sultan that needs to be followed (see [e] al-Qurtubi).
And Victory belongs to Allah. In Him we trust and praise belong to the Lord of the worlds and peace and blessings on His Messenger.
The slave of Allah, Hajj Abdalhasib Castineira, in Kuala Lumpur, on the 5th of Ramadhan, 1431.


NOTES

A] Imam Abu Zayd Ibn Khaldun (d. 1406)
“The Revelation undertook to mention them and attached many judgments to them, for example zakat, marriage, and hudud. Therefore within the Revelation they have to have a reality and specific measure for assessment (of zakat, etc.) upon which its judgments may be based rather than on the non-shari’i (other coins).
Know that there is a consensus (ijma) since the beginning of Islam and the age of the Companions and the Followers that the dirham of the shari’ah is that of which ten weigh seven mithqals (weight of the dinar) of gold… The weight of a mithqal is seventy-two grains of barley, so that the dirham which is seven tenths of it is fifty and two fifths grains. All these measurements are firmly established by consensus.”
“Al-Muqaddimah”

B] Imam Abu Bakr al-Kasani ( d.1191)
“If the property on which zakat fell due is dayn, as distinguished from ‘ayn, its zakat may be settled in terms of ‘ayn wealth. Thus a person having a claim of two hundred dirhams on which zakat is due, may give, in settlement of the same, five dirhams in cash, because dayn as compared with ‘ayn is defective (naqis) and the ‘ayn is complete (kamil), and a settlement of the defective in terms of the complete is valid. On the contrary, the settlement of the complete ‘ayn in terms of the defective (dayn) is not valid, and therefore, the zakat debt is not discharged if a person wants to pay the zakat of two hundred dirhams which he possesses (i.e. ‘ayn) in terms of the five dirhams which a poor person owes him (i.e. dayn); namely, by absolving him from the debt intending it for his own zakat debt on the two hundred dirhams.”
“Bada’i` al-Sana’i”

C] Shaykh Jalaluddin al-Mahalli & Shaykh Jalaluddin al-Suyuti

Allah says in the Qur’an (4, 29):
{ يَٰأَيُّهَا ٱلَّذِينَ آمَنُواْ لاَ تَأْكُلُوۤاْ أَمْوَٰلَكُمْ بَيْنَكُمْ بِٱلْبَٰطِلِ إِلاَّ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٍ مِّنْكُمْ وَلاَ تَقْتُلُوۤاْ أَنْفُسَكُمْ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيماً }
Tafsir:
“O you who believe, consume not your goods between you wrongly, unlawfully according to the Law, through usury or usurpation, except it be trading (tijāratan, also read tijāratun), so that the goods be from trade effected, through mutual agreement, through mutual good-will: such [goods] you may consume. And kill not yourselves, by committing what leads towards destruction on account of some affiliation, be it in this world or the Hereafter. Surely God is ever Merciful to you, when He forbids you such things.”
“Tafsir al-Jalalayn”


D] Qadi Abu Bakr Ibn al Arabi (d. 1148)
Allah says in the Qur’an (3:75):
“And amongst the People of the Book there are those who, if you were to entrust them with a treasure (qintar), he would return it to you. And amongst them is he who, if you were to entrust him with a dinar would not return it to you, unless you kept standing over him. “
Tafsir:
“the benefit that can be taken from this is the prohibition of entrusting (amanah) the People of the Book with goods. The question concerning entrusting property is legislated by the text of Qur’an.”
“Ahkam al-Qur’an”

E] Imam Abu Abdallah Al-Qurtubi (d. 1273)

Allah says in the Qur’an (4:59):
“O you who believe! Obey Allah and obey the Messenger and those in command among you..”
Tafsir:
“The ayat is an order to obey the Sultan in respect to seven obligations: the minting of the dinar and the dirham, fixing weights and measure, legal judgments, Hajj, Jumu’ah, the two Eids and Jihad.”
“Al-Jami’ li-Ahkam al-Qur’an”

KELANTAN DINAR AND DIRHAM HAVE ARRIVED

Probably the biggest news story of the millenium
Courtesy of the Muamalat Council website

For most of Malaysians the morning on Tuesday, 8th June 2010, was just another morning in their existence – monotonous run on the capitalist treadmill – nothing extraordinary indeed: the same tropical weather (+32C) outside, same sickening news in the media, same interest rates, same order of the day.

But for the people of Kelantan this morning was very special: on the 8th June 2010 at 11am the box with the set of the first gold dinars and silver dirhams of the State of Kelantan arrived to Kuala Lumpur from the World Islamic Mint, Dubai. Sending the sample coins is the standard procedure in minting industry, the main lot will follow just in a matter of days.

Although Kelantan government first minted gold dinars in 2006, the new coins have a new reality because:

* This is the first time when not just gold dinar but also silver dirham has been minted;
* This is the very first time the Kelantan dinars and dirhams are minted in accordance with the international standard which is set by World Islamic Trade Organization (WITO) and monitored by World Islamic Mint (WIM); 99% of all dinars & dirhams minted worldwide in the last 20 years is the work of WIM, hence the new Kelantan coins – the reverse side of the coins bear the logo of WIM while on the obverse is coat of arms and name of Kelantan Government – have international status and acceptance among millions of muslim and non-muslim users around the world;
* This is also the first time when the coins are minted in all denominations: Dinar – ½, 1, 2, 5, 8; Dirham – 1, 2, 5, 10, 20;
* Unlike before this time the new coins will be distributed to public throughout the state of Kelantan under homogenized pricing scheme and proportionate value between denominations;
* And most significantly, this is the first time when all state companies in Kelantan will accept the Islamic coins as well as 600 shops (in the first phase) displaying the sticker “We Choose Dinar&Dirham” thus instantly giving a broad avenue for the public to utilize their coins.

And this is just the beginning, the second phase will see introduction of features like safe-keeping facilities (wadiah) and electronic payment system to further enhance the level of customers’ convenience.

click here to see the full article on the Muamalat Council website

Fair Trade – An Islamic Overview

by Hajj Asadullah Yate

Fair trading (‘adl) in the market-place is based on trust. The establishment of healthy trade is an act of worship, modelled upon the trading practice of the Messenger of Allah, may the peace and blessings of Allah be upon him.

As a principle, any exchange of goods is permitted as long as it does not involve;

1. forbidden commodities (e.g. wine, pig)
2. usury (any increase without corresponding counter-value)
3. uncertainty (e.g. sale of wheat before it is harvested, or fish before they are caught)
4. fraud (e.g. charging higher prices to travellers unaware of local prices)
5. extortion (e.g. manipulation of market conditions, monopoly, monopsomy)

Customary Practice

Fair trading is also based on a community’s understanding of the value of things, that is, their customary practice (‘urf); the local community must be left to make its own evaluation of goods. It cannot be an evaluation imposed from above or from outside.

Usury

Usury is the most pernicious destroyer of equity in the market-place and is the gateway to social imbalance and oppression and the proliferation of other malpractices. Previous generations took great pains to identify those transactions in which elements of usury had been introduced wittingly or unwittingly.

However innocuous a usurious transaction may seem, there is always an underlying element of gain for one party at the expense of loss for the other. Those engaged in such activity, Ibn Rushd states, “pay out money and receive more back without performing any deed or assuming any liability”.

Ibn Rushd insisted on the social importance of this question. “It is obvious from the sharicah that the reason for prohibiting usury is to prevent the fraud that it entails. Justice in transactions consists in close approximation and equivalence [between the goods exchang-ed]”.

Means of Exchange (Currencies)

Currencies exist in any trading situation. Ibn Rushd indicates the purpose of currency: “Since it is difficult to equate the values of things whose natures are different, dinars and dirhams are used to price them”. Here gold coins (dinars) and silver coins (dirhams) and similar non-perishable, easily quantifiable commodities with intrinsic value, not bank-notes, are referred to.

It is acceptable for those in authority to standardise currency to ensure its reliability, e.g. by issuing assayed and weighed gold and silver coins. It is against market equity for the authorities or any cartel, such as the banks, to monopolise the means of exchange. This enables the authorities, whether of bank or state, to debase the coinage (which is a hidden, and forbidden, taxation!) which is usurious because the authorities can contract debts at one value in real terms and pay them back at other values.

The creation of monopoly in the means of exchange also allows the appearance of fiat money ie. currency, based on faith, with no intrinsic worth, such as paper or electronic credits, whose value is imposed politically. This involves the fraudulent exchange of real assets for worthless tokens and facilitates the usurious manipulation of devaluation, inflation and deflation.

The Sale of Commodities

In order to prevent usury, you can only exchange commodities sold by weight and measure i.e. staple foodstuffs, gold and silver, for the same type of commodity e.g. minted gold for unminted gold or good dates for poor dates, when you exchange equal weight for equal weight, measure for measure, with no deferral of payment. Ibn Rushd explains it thus: “Given that there are no radical differences between specimens of the same type, when their uses are approximately the same, and that the person in possession of one type has no pressing need to exchange it for another of the same type, except by way of extravagance, equity is obtainable only on the basis of equivalence in terms of weight and measure”. In other words it is permitted, albeit regarded as an ‘extravagance’, to exchange patna rice for basmati, but only as long as the weight of the patna equals that of the basmati.

Forbidden Sales in Commodities

Ibn Rushd lists eight examples of sales, each of which demonstrates how usury enters into sales of commodities.

1. “Give me respite [from repayment of a debt or payment for goods bought on credit] and I will increase [the amount to be paid]”. (In other words the borrower or purchaser, addressing the lender or seller, says “Give me more time to pay the debt and I will pay you back more”).
2. A sale with forbidden disparity. (This refers to staple, storable foodstuffs, gold and silver which cannot be exchanged ‘with each other’ with disparity: thus an exchange of 1 gold coin for 10 silver coins is permitted but an exchange of two pounds of poor quality dates for one pound of good quality dates is not. If good quality dates are required, the poor quality dates must be sold and good quality dates bought with the proceeds).
3. A sale with forbidden delayed payment. (This refers to gold in exchange for silver, dates in exchange for raisins, or wheat etc., etc., which although of different types cannot be exchanged with each other when payment of one of the two is not immediate).
4. A sale combined with a loan. (All contracts which are composed of more than one transaction are forbidden).
5. A sale of gold and merchandise for gold. (This is because, in effect, gold is being sold for gold with disparity Ð the merchandise only obscuring the transaction).
6. The sale known as ‘reduce the amount in return for immediate settlement’. (This is a kind of usury in which the borrower who has agreed to pay back money by a certain date offers to pay a smaller amount before this date Ð now known as discounting of bills or factoring of debts).
7. The sale of foodstuff which has not yet been received in full [by the seller]. (Actual possession must be taken of all foodstuffs before their resale).
8. A sale combined with a money change. (Again, this is a trans-action in which the equivalence demanded of any money change is obscured by the accompanying sale and is also two transactions in one contract).

Ibn Rushd cites “the protection of wealth and prevention of squandering” as Malik’s explanation for the prohibition of usury. He also mentions Ibn al-Majishun’s explanation as “preservation of property (hiyata al-amwal) meaning that fraud should be prevented”.

The term “usury” has a much wider definition than that of [modern] English law: usury, in effect, can occur in almost any transaction: thus pure sales, barter transactions, money exchanges, speculation, the leasing of land for a share of its produce, control through monopoly etc. are all subject to the prohibition of usury if unjustified increase occurs to one party.

The Elimination of Parasitical Third Parties

What is significant for us is that parasitical third parties, state interference, commercial taxes and devious practices have no place in the Muslim trading world: there can be no money lenders, no bankers, no speculators, no stock exchanges, no promissory notes, no bonds, no lotteries. Traders must be free to operate within a basically healthy arena in which the pillars of sound trade are in place, namely free access to gold and silver as currency and the right to choose any means of exchange, unfettered by the tyranny of paper, plastic or computerised money, free of the monopoly of the banking system which governs all financial and political transactions today.

In the concluding remarks to the Bidaya al-Mujtahid Ibn Rushd points out that the underlying rationale of all transactions regulated by the law is the establishment and maintenance of human virtues, in this case that of justice. The way of the Muslims, the shari’ah, is composed of various behavioural patterns or sunnas. The prohibition of usury, risk and speculation are among the sunnas which “relate to the pursuit of justice and the avoidance of oppression: these are the kinds of sunna which demand equity in financial matters (al-‘adl fi’l-amwal) and justice amongst people.”

TRADE

Traders move goods from a place, where these goods are in abundance, to another where there is a market for them. The trader expends energy in his going out to find suitable goods, in securing a reasonable price for them, in transporting and guarding them safely, and finally in selling them to a second party. The usurers however rent out money, which by its nature is only tolerated by natural communities as a means of exchange, and merely wait for its return with increase. They produce nothing, do not contribute any work and do not incur any risk. They are parasitical third parties who borrow from one source at one rate and lend to another at a higher rate thus preventing direct contact between investors and entrepreneurs. The most sophisticated form of usury is the establishment of ‘national banks’ which gather up a country’s gold and silver, prohibit its use by the people, print paper money – of which they have the monopoly Ð in its stead and then raise or decrease its ‘value’ (by devaluation, inflation or exchange-rate adjustments) to create speculation and the opportunity for vast profit.

Trade is generated from the face to face meeting of men who do not negotiate with any third party, be it in the guise of state tax regulations, customs tariffs, bankers, brokers, insurers or specialists in ‘international’ law. A trader’s handshake or his word is enough to seal a contract.

CONTRACTS

A contract is an act of trust between two people. Its reality extends beyond the material exchange of two commodities. A trader knows that his reputation for honest dealing is the key to swift and uncomplicated exchanges. Written contracts are drawn up whenever the exchange of goods or payment is delayed and the two parties see this to be of mutual benefit Ð when agreed delivery dates and precise measurements of commodities to be supplied in the future, for example, might otherwise be forgotten. Likewise witnesses may be signatories to a contract if their presence facilitates trust between the two parties.

In general, a contract Ð that is an offer and an acceptance and the obligation [to supply or pay for something] Ð is binding upon the parties when the buyer accepts the seller’s offer, before the two parties separate. When the buyer takes possession of the goods he usually accepts liability for them. There is, however, a warranty period, during which the buyer may return the goods to the seller and recover his payment if he discovers a defect in the goods. This is as long as the two parties have not agreed upon a waiver of this warranty (bara’a) during their meeting. The seller may not normally impose any condition on the buyer restricting the latter’s ownership of the goods.

FORMS OF CONTRACT

The Prophet, may the peace and blessings of Allah be upon him, sanctioned qirad investments which exclude any usurious third party: by it the investor (rabb al-mal) makes over a certain sum of money (in gold or silver) to an ‘agent’ (al-‘amil). The agent uses these funds to trade and pays back the capital plus a previously-agreed percentage of the profits to the investor when the goods bought with the funds have been sold. The increased return on the initial investment is equitable as it is a loan which incurs risk for both parties: if the agent makes a loss (on the investment and on his time and work) the investor will also make a loss.

Partnership

Partnership likewise excludes usurers. By it, two or more parties come together and contribute equal shares of money, goods, equipment and work (shirka al-amwal), and then divide the profit between themselves equally. If the contribution from one partner (of either money, goods, equipment or work) is greater than the other partner, equity must be established by a division of the profits which is in proportion to this disparity. Equity may also be established in a partnership by one partner contributing all the equipment, for example, and the other contributing all the goods, as long as the rental value of the equipment and the profit-potential of the goods is approximately the same. Partnerships based solely on persons’ work (shirka al-abdan, i.e. when two cobblers come together and ‘share’ the same customers) must be located under one roof. Each partner is liable for delivery of orders taken by the other. When partnerships are based on money, each partner is free to buy and sell with the ‘pooled’ money of the partnership (that is a mufawada part-nership of mutual delegation); when trading out of their localities, partnership funds may be used for travel expenses and maintenance of each partner’s family. It is, however, permitted to restrict the use of the ‘pooled’ resources by a mutual agreement to only buy and sell with both partners’ knowledge.

Shirka fi’l-bai’

A shirka fi’l-bai’ contract is one in which one party says to the other: ‘Make me an equal partner in this article belonging to you on condition that I sell it for you’. In effect what happens in this transaction is that the article is transferred to the first party without payment of money. It is equitable, however as the first party has become a partner in the article and pays for it by undertaking to sell it (in this respect it is not dissimilar to a contract of hire whereby the owner ‘hires’ the services of another party and pays for this hire by making him a partner in the goods). When he does sell it, he pays back half of the original value of the article to the second party together with half of the profit realised by their partnership. The ‘owner’ of the goods may fix a minimum price or the expected profit margin for the article which the other will sell.

Murabaha

A murabaha sale is one in which a trader goes to another city and states prior to a deal that he is selling a commodity for such and such an amount above his cost price. This transaction is permitted as it is essentially the same as buying and selling: it is equitable as both partners are legitimate traders who both agree on the nature and quality of the subject matter of sale and their profit margin prior to any dealing. It is based on the first party’s trust that the other partner will always only add on, for example, 10% profit for himself on top of the price of the goods and his expenses incurred in procuring and delivering them.

Salam

In any sale/exchange, payment and the taking delivery of the goods is normally simultaneous. A salam contract is a form of sale on delayed terms in which the money (or anything used in payment) may be paid first and the goods delivered at a later date. This is to permit the making of a contract for goods which are in another country or only available, for example, on the market day of the following month. The precise date of delivery must be stipulated. The commodities exchanged must be different to each other in kind or in use, and must not involve the exchange of food for food or gold for silver. The salam contract does not stipulate that a specific object will be delivered at such and such a date but rather stipulates the type of object, like a horse or a sword. A nasi’a contract is similar except the money is paid later. It is not permitted, however, that both payment and delivery of the thing paid for are delayed. In any sale, be the payment or delivery of goods immediate or delayed, transfer of ownership is effected at the time of the deal (i.e. immediately the offer of the first partner is accepted by the first).

Ijara

A rental contract (kira’, ijara) is one in which one party, the leaseholder (al-mustajir), pays for the temporary use of a house, beast, or piece of equipment. The contract must stipulate the hire-charge, the period of hire and the location in which the thing hired is to be used. The owner (al-malik) of the rented article is liable for any damage to the article. Similar to this are contracts of hire regarding persons engaged to work for a daily, weekly or monthly wage (ijara) or to complete a specific job for a specific reward in a time which is not specified (jucal). Although it is permitted to ‘hire’ someone to buy you something it is not permitted for you to ask him to use his own money on the understanding that you will pay him back later.

Markets

The Amir sets aside areas as markets in which the people may come to sell their goods. The stalls or shops are ideally of a non-permanent nature, erected merely for the protection of the traders and the goods from the weather. They are there so that those who want goods from artisans, farmers and agents may buy them from them. People set them up at times of harvest, on the arrival of caravans and for a variety of other seasonal and social reasons. They are not a prelude to the establishment of fixed, structured shops, grocers, engrossers, wholesalers or ‘supermarkets’. These latter only hoard and monopolise commodities in order to control and manipulate prices. Markets, when they reach this stage of ‘development’, become a barrier to free exchange for those who wish to buy and sell at a modest level. All such practices (known as engrossing and regrating in English law) were outlawed by edict until the introduction of foreign ‘Banking’ law (i.e. the law of the moneylenders and hoarders) at the beginning of the 18th century.

Caravans

A caravan is a group of traders, qirad agents, partners or artisans who travel together to establish new markets or take part in existing markets outside their home countries in order to buy and sell. Their travelling together affords the protection of a company of men, and protection from the dangers of the open road. They should not have to pay any taxes in the establishment of these markets. They only require the permission of the local Amir. It is not permitted for people to go out to meet the caravan before it has arrived in a town in order to buy goods wholesale and at a lower price than the goods would otherwise have fetched on the open market (forestalling).

Zakat

We must recognise the obligation of paying zakat-tax on wealth to the Amir as well as and at the same time as establishing free markets. Payment of the zakat purifies and increases the wealth generated from trading, confirms traders allegiance to their Amir and ensures the distribution of surplus wealth to the poor, the needy, those fighting in the way of Allah and for justice, and other categories of persons.

Commenting on Allah’s words: “That which is given [as zakat-tax] is for the poor, the needy, those who work for this [zakat], for those whose hearts might come closer [to Allah], for slaves, for debtors, and in the way of Allah and for the traveller: [this is] an obligation from Allah, and Allah is the Knower, the Wise.” (Sura at-Tawba, ayat 60), Ibn Juzayy in his Qawanin says: “As for ‘those who work for this [zakat]’, they are the persons who collect, distribute and record it, even if they have independent means. This depends upon their being just and knowledgeable of zakat-law.

As for ‘those whose hearts might come close [to Allah]’, they are the kuffar, to whom it is given in order to encourage them to Islam.

Its distribution is according to the estimation of the Amir. It is permitted to give it to only one of the eight categories of persons mentioned in the Qur’an, or to give preference to one category over another. Moreover anyone who qualifies for two of the categories has a right to two shares.

It is not to be transferred from the region in which it was collected, except when there is an excess.

The zakat is not to be spent on building mosques, nor on burying the dead.

It is obligatory to pay the zakat to the Amir if he is just.”

See glossary of terms

May Allah Protect Us – A Lesson from Surah Tawba

In recent days my morning study has led me to reading from Surah Tawba and simultaneously referring to the corresponding section in the Tafsir Jalalayn (of the two Jallaludin’s). The surah refers a lot to both Jihad and Zakat and thus indicates the link, or at least the similarities, between the two of them. Of course the 60th ayat is the one that spells out in no uncertain terms exactly who can receive collected Zakat

What really woke me up was the story of Tha’laba ibn Hatib who asked the Prophet, peace and blessings be upon him, to pray to Allah to provide him wealth in order to pay off his creditors (I know that feeling well) and the Messenger of Allah duly obliged and his wealth soon expanded. However, Tha’laba ibn Hatib then started began to cease to attend the Jumu’a prayer and refused to pay Zakat. It appears that later the 76th and 77th ayats were revealed.“But when He does give them of His bounty they are tight-fisted with it and turn away….so he has punished them by putting hypocrisy in their hearts until the day they meet him…”

After that he came back to the Prophet, may Allah’s blessing be upon him, with his Zakat but the Prophet was now forbidden by Allah from collecting it and so refused, likewise did Abu Bakr, Umar and then Uthman.

Early on in the surah we are told of those who refused to go on Jihad with the Messenger of Allah, peace be upon him, and his companions and were then refused permission to go on later expeditions. May Allah protect us from their fate and the fate of Tha’laba ibn Hatib and make us people who jump at the opportunity to pay Zakat, and to strive fi sabilillah with our wealth and ourselves, and by that gain the garden and be exempted from the hell-fire. Amin

Banks Gang Up on Palestinian & Muslim Charities

The following news item is quoyed from the Chatity Finance website and their is also a linked blog post by Vibeka Mair. I thought it was important for Muslims to see that this is shocking and unprecedented behaviour, surprising even to those like myself who have been long involved in the charity sector

Trustees of the UK-based Palestinian charity Interpal met representatives from the Treasury last month to protest about Lloyds TSB’s move to cut off the charity’s bank account. The trustees met Lord Myners, financial services secretary to the Treasury, at their request to complain about the fact that Lloyds TSB has stopped clearing Interpal’s cheques presented through the charity’s bank, the Islamic Bank of Britain.

A spokeswoman for the charity said the meeting did not bear any real fruit. “All levels of government know about the situation but still nothing is being done,” she said. However, she added that an interim solution had been found – the Islamic Bank of Britain has been able to transfer funds overseas for Interpal via other means. “They found a way to work around the service that Lloyd’s had been providing. We know this has been successful because we have spoken to people on the ground in Palestine.” However, Interpal still needed a long-term solution to the problem.

A spokesman for the Treasury said the government wasn’t getting involved “at this stage”. “At the moment it is just a commercial matter for the bank,” the spokesman said. However, he added that “not everyone that asks for a meeting with a minister gets one”.

Elsewhere, Barclays Bank has decided to close the account of humanitarian charity Ummah Welfare Trust (UWT), an Islamic charity which works in 20 countries worldwide including Afghanistan, Palestine and Pakistan. Barclays Bank has refused to give the charity a specific reason. UWT director Mohammed Ahmed said Barclays simply told him “it’s because of risk exposure.”

However, Ahmed added that the Charity Commission, who has met with UWT (pictured) to discuss Barclays’ decision, told him it would request a reason from the bank on the charity’s behalf. UWT, which gets much of its income from regular givers, will now face extra costs to tell donors to change the details of their direct debits or standing order.

The charity also fears it will lose donors who will not want the hassle of setting up a new standing order.
Dangerous precedent Barclays added an extra 21 days to UWT’s original 30-day notice on the account closure after the charity complained that it didn’t have sufficient time to deal with all of its direct debits and standing orders. Ahmed, however, believes the charity still does not have adequate time.nUWT is now looking at its options and considering a campaign.

“This decision sets a dangerous precedent of disrupting British charities without any substantiation,” said Ahmed. “This decision will not only affect the great work carried out by UWT but will affect millions of people who rely on UWT.”

It might be quite timely to read our previous post “Alhamdulillah for Lloyds TSB