AHMAD KAMAL BIN ROSLAN 2009658166 SHAZANAH BT SARWAR KHAN 2009826226

QUESTION 12

Describe the following features which have been prohibited in Islam: a. Riba b.
Maysir

RIBA

DEFINITION :Literally - increase, addition, and augmentation Technically: 1) inc

rease in trade transactions

2) increase in loan transactions

Abu Bakar Jassas ;
It is a loan given with stipulated increase on the principle payable by the loanc
e
Muhammad Ala Thanwi

An increase without any corresponding consideration which has been stipulated in

favour of one of the two parties in a contract of exchange

PROHIBITION OF RIBA IN AlQURAN

4 stages
Surah al- Rum: 39
Surah al-Nisa: 161 Surah ali-Imran : 130
Riba was prohibited for jews however,they continued to practice riba & Incurred
the wrath of Allah (s.w.t) Prohibited the charging of double and multiple riba
Compare riba with Zakat& charityPraised zakat& charity but not riba
Surah alBaqarah 275-281
Conclusively prohibited all forms of riba

PROHIBITION OF RIBA IN HADITH

From Jabir (Gbpwh);
the prophet (pbuh) cursed the receiver and the payer of interest , the one who r
ecords it and the witnesses to the transaction and said: they are all alike [in
guilt]
From Anas ibn Malik (Gbpwh);
The prophet said: when one of you grants a loan and the borrower offers him a di
sh, he should not accept it,and if the borrower offers a ride on an animal, he s
hould not ride, unless the two of them have been previously accustomed to exchan
ging such favours mutually
Bilal (Gbpwh) once visited the Messenger of Allah (Pbuh) with some high qualitie
s dates. The Prophet (Pbuh) inquired about their source. Bilal explained that, h
e traded two volumes of lower quality dates for one volume of higher quality dat
es. Due to this, the Prophet (Pbuh) said;
This is precisely the forbidden riba! Do not do this. Instead, sell the first typ
e of dates, and use the proceeds to buy the others

MUSLIM JURISTS OR SCHOLARS VIEWS ON RIBA

Abd al-Rahman al-Jaziri in his book al-Fiqh 'ala al-Madhahib al-Arba'ah stated tha
t, in fiqh terminology, riba means an increase in one of two homogeneous equival
ents being exchanged without this increase being accompanied by a return. Muhamm
ad ibn Abdullah ibn al-Arabi who is a Qur'an commentator and Maliki jurist state
s that, riba literally means increase, and in the al-Baqarah: 275, it stands for
every increase not justified by the return.

CLASSIFICATIONS OF RIBA
Types of Riba
Riba alBuyu(riba in trade transaction
Riba alDuyun (riba in loan transaction) Riba alQardh Riba alJahilliyah
Riba alNasiah
Riba alFadl

CLASSIFICATIONS OF RIBA (cont)

Riba al- Buyu (riba in trade transaction):Riba al-Nasiah (riba of delay) -charged
based on deferment of completion of an exchange - Eg: if 5 kg of gold is exchan
ged with another 5 kg of gold, with a delay of one year, the said trade transact
ion will amount to riba al nasiah since there is an existence of delay in the sa
id transaction Riba al-Fadl ( riba by way of access) -arises when there is any a
dditional quantity or in equality in the exchange of goods -Eg: an exchange of 5
kg of wheat with 6 kg of wheat amounts to riba al-fadl

CLASSIFICATIONS OF RIBA (cont)

Riba al- Duyun(riba in loan transaction):
Riba al-Qardh :any predetermined benefit, for the owner of debt stated in the co
ntract, which the debtor needs to fulfill. This form of riba could be viewed in
loan contracts. Riba al- Jahilliyah:a form of interest, which is charged above t
he original debt as a penalty to the debtor due to his inability to service the
loan repayment within the time agreed. This form of riba could be viewed in cred
it card transactions where, the delay of repayment of the debt by the debtor wil
l result the debtor to pay an additional or surplus amount to the creditor

RATIONALE ON THE PROHIBITION OF RIBA

The paramount reason or rationale behind the prohibition of riba are to prevent
any forms of injustice, exploitations and manipulations among the parties involv
ed in a trade or loan transaction. In order to appreciate the rationale underlyi
ng the prohibition of riba in Islamic transactions, one shall generally analyse
the advantages of performing an interest-free transaction in Islamic banks as co
mpared to an interest-based transaction in the conventional banks

RATIONALE ON THE PROHIBITION OF RIBA (cont)

Islamic banks
will reward the depositors only in the event where the banks are gaining profits
. In the circumstances where the Islamic banks are suffering losses, the banks w
ill not be compelled to pay any amount of profit to their depositees the clients
of an Islamic bank will receive a fair share of profit based on the proportion
agreed
Conventional banks
would be obliged to pay to the depositors more then the principal amount deposit
ed regardless whether the financial institution is having financial difficulties
or suffers loss clients of a conventional bank are guaranteed to receive a fixe
d income from the bank, the income agreed is only a very small portion as compar
ed to the total amount of profit gained by the banks

RATIONALE ON THE PROHIBITION OF RIBA (cont)

Islamic banks
have resorted contract of exchange as the best accommodative mode of mobilising
funds under an Islamic finance framework. Due to this, various innovative instru
ments based on the contract of exchange have been developed. Eg: BBA (deferred p
ayment sale), murabahah (mark up sale),ijarah (leasing),ijarah thumma al-bay (is
lamic hire purchase) and bay-al dyn (sale of debt)
Conventional banks
Accumulate profits through interest- based transactions

RATIONALE ON THE PROHIBITION OF RIBA (cont)

Islamic banks
Conventional banks
has explored the contract of -Accumulate profits through security to mobilise th
e funds and interest- based transactions present product available based on hiwa
lah (transfer of debt). -have also maintained the contract of services -E.g: Let
ter of Guarantee based on kafalah, fees for money transfer and the like.

MAYSIR
Definition:
Maysir derives from the word Yusrun which denotes wishing something valuable with
ease and without paying any equivalent compensation for it, or without working f
or it, or without undertaking any liability against it, or by way of a game of c
hance.

MAYSIR
Definition:
Professor Mohammad Hashim Kamali:

Maysir is a purchase and sale of an asset in the expectation of a gain from the
changes in the price of the asset. However, it is difficult to provide a compreh
ensive definition since there are distinguishing lines between investment, specu
lation and gambling.

MAYSIR
Definition:
Ibn Taymiyyah:

gharar is one of the branches of gambling. whether or not the transaction involv
es gambling and unlawful devouring of the property of others (akl mal al ghayr b
il batil). Gharar thus occurs in a contract when one of the parties takes what is
due to him but the other does not receive his entitlement. If his right continu
es to be unfulfilled, the first becomes guilty of the wrongful devouring of the
property of his counterpart in the transaction, and a gharar sale of this kind e
ngages in gambling and punting (al-qimar wal maysir)

MAYSIR
Why Maysir is prohibited?
Dr. Mohd Masum Billah:

Gambling, which includes raffling or a lottery makes a person dependent on chanc

e, luck and empty wishes, thus, making that person less inclined to work serious
ly and productively. In Islam, an individuals property is sacred and it may not b
e taken away from the owner except through lawful exchange, or unless he or she
gives it away freely to charity. Accordingly, taking the property of a person as
gambling losses is unlawful.

MAYSIR
Prohibition of Maysir in Al-Quran:
They ask Thee concerning wine and gambling. say: "In them is great sin, and some
profit, for men; but the sin is greater than the profit." They ask Thee How muc
h They are to spend; say: "What is beyond your needs." Thus doth Allah make Clea
r to you His Signs: In order that ye may consider
(al-Baqarah:219)

MAYSIR
Prohibition of Maysir in Al-Quran:
O ye who believe! Intoxicants and gambling, (dedication of) stones, and (divinat
ion by) arrows, are an abomination,- of Satan's handwork: eschew such (abominati
on), that ye may prosper. Satan's plan is (but) to excite enmity and hatred betw
een you, with Intoxicants and gambling, and hinder you from the remembrance of A
llah, and from prayer: will ye not then abstain?
(al-Maidah: 90-91)

MAYSIR
Prohibition of Maysir in Al-Quran:
Forbidden to you (for food) are: dead meat, blood, the flesh of swine, and that
on which hath been invoked the name of other than Allah; (forbidden) also is the
division (of meat) by raffling with arrows: that is impiety.
(al-Maidah: 3)

MAYSIR
According to a tradition reported by Abu Huraira, Allah's Messenger (pbuh) forba
de a transaction determined by throwing stones, and the type which involves some
uncertainty. The form of gambling most popular to Arabs was gambling by casting
lots by means of arrows, on the principle of lottery, for division of carcass o
f slaughtered animals. The carcass was divided into unequal parts and marked arr
ows were drawn from a bag. One received a large or small share depending on the
mark on the arrow drawn. Obviously it was a pure game of chance.

MAYSIR
Why conventional Life Insurance is prohibited?
First, a life insurance contract involves unlawful elements, which can never be
binding as the Prophet (saw) says to this effect:
the Muslims are bound by the conditions
except the condition which prohibits the permitted one or the one which permits
the prohibited one.
(al-Tarmizi)

MAYSIR
Why conventional Life Insurance is prohibited?
Second, it contains an element of betting.

When betting, the gambler always hopes for a chance to make a gain. Similarly, i
n a life insurance policy, the assured upon the payment of premiums to the insur
er, always hopes for a chance to gain a large amount of money. Hoping for such a
chance is similar to gambling and thus, Shariah never recognises life insurance
as a valid transaction.

MAYSIR
Why conventional Life Insurance is prohibited?
Third, it contains the element of maysir (gambling).

When gambling, a gambler pays a certain amount of money in the hope that he will
gain an additional large amount of money. Similarly, in a life insurance policy
the assured hopes for a chance to make a gain. This is the same as gambling whi
ch is prohibited by the
Shariah.

MAYSIR
Why conventional Life Insurance is prohibited?
Fourth, it contains the element of Riba.

Many Ulama oppose life insurance practices, because they contain elements of bot
h kinds of riba, i.e. riba al-fadhl and riba al-Nasiah. For example, if the insu
rer pays the insured or his beneficiary more than what the insured had paid by w
ay of paid-premium, it becomes riba al-Fadhl; the payments made by the insurer t
o the assured after a particular period of time become riba al-Nasiah.

MAYSIR
Why conventional Life Insurance is prohibited?
Fifth, it has an element of al-Gharar (uncertainty).
The contract is deemed to be null and void ab
initio.

In a life insurance contract, the subject matter of the contract is the death of
the assured and it is not certain whether the assureds death will occur during t
he policy period or not. This uncertainty in the policy leads it to be invalid.

MAYSIR
Speculation in the Stock Market:
Short Selling?

Short selling of stocks is not permissible because it is seen to be

in nature. Under this practice, when a person foresees that a share
all, that person will borrow from and instruct his remisier to sell
n that company, even though he does not own the shares. Later, when
the shares do fall, that person will purchase the stocks and close
.

speculative
price will f
the shares i
the price of
its position

MAYSIR
Speculation in the Stock Market:
Short Selling?
This practice is clearly prohibited under the Shariah principles because it invol
ves the selling of something which the seller does not as yet own.

MAYSIR
The Effect of the Contract Entered Into:

A void contract is an agreement which is merely null and incapable of conformati

on. The Mejella defines a void contract as a contract which is not good in its fo
undation. According to Dr. Hussain Hamid Hassan: A void contract has no existence
in the eyes of the law, it does not confer a right, does not become obligatory a
nd does not transfer any property.

MAYSIR
The Effect of the Contract Entered Into:
Among the circumstances whereby a contract is said to be void or bathil:

(1) A contract which involves immorality; (2) A contract which object is unlawfu
l; (3) A contract which involves illegality against public policy; (4) A contrac
t which foundation or substance is unlawful or illegal; (5) Any other contract o
r agreement which directly or indirectly contrary to the divine sanctions which
would render it void ab initio; and etc.

CONCLUSION

The practice of riba and maysir is strictly prohibited under the Shariah law as
provided by the Al-Quran and hadith. The opinions delivered by the Muslims juris
ts have also further clarified the prohibitions on riba and maysir. It is crucia
l to note that, the practice of riba and maysir are illegitimate in any Islamic
form of transactions.