fundamentals of shariah

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1 FUNDAMENTALS OF SHARIAH FUNDAMENTALS OF SHARIAH presented by Ahmad Sanusi Husain FINANCIAL SECTOR TALENT ENRICHMENT PROGRAMME

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Fundamentals of Shariah

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Slide 1*
Definitions of Musharakah and Mudharabah
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six of Mudharabah as follows.
Musharakah Mudharabah
(ii) capital (ii) entrepreneur
(iii) business (iii) capital
(v) contract (v) profit sharing
(vi) contract
There are 16 necessary conditions relating to its essential elements.
(1) Contract
(i) in definite and decisive language. In the
present or past tense, not future tense nor imperative
(ii) acceptance must agree with offer and
(iii) offer and acceptance made at the one and
the same meeting
(i) capable of taking responsibility, i.e.
- of sound mind
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- not declared bankrupts or
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(i) any asset valued in money
(ii) not debt
(iii) specific amount
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(i) halal and
Profit/ Loss Sharing
There are two necessary conditions:
(i) according to proportion of shares or according to agreement in fraction, ratio
or percentage, not in absolute amount.
(ii) loss born by all partners according to
proportion of shares
There are 16 necessary conditions relating to its essential elements.
(1) Contract
(i) in definite and decisive language. In the
present or past tense, not future tense nor imperative
(ii) acceptance must agree with offer and
(iii) offer and acceptance made at the one and
the same meeting
(2) and (3)
Owner(s) of Capital and Entrepreneur must meet the following four necessary conditions:
(i) capable of taking responsibility, i.e.
- of sound mind
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- not declared bankrupts or
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(v) paid to entrepreneur
(i) halal
Profit Sharing
(i) profit shared according to agreement in
fraction, ratio or percentage, not in absolute amount.
(ii) loss borne by owner(s) of capital only
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Contracts
corporate as well as individuals. They may be applied in
all sectors of industry i.e. agriculture, manufacturing,
trading, banking, transportation and other services.
*
SUPPORTING CONTRACTS
Supporting contracts most often used in connection with debt financing are as follows:
- rahn (pledge)
- dhaman (guarantee)
- wakalah (agency)
follows:
Pledgor
Pledgee
Pledge (property pledged)
Pledgor and Pledgee must meet three necessary
conditions as follows:
They must not be prohibited from dealing with their properties.
No coercion is exerted on them.
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A debt must have been established.
The debt must be known.
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(4) Pledge (property pledged)
Anything that can be bought and sold can be pledged and
this must meet six necessary conditions as follows:
It must exist (can be perceived by sense of touch).
It must be pure (halal) according to the shariah.
It must be of use according to the shariah.
- It must not be too little as to be of no use.
- It must not distract from remembering Allah.
- It must not be used for haram purposes.
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It must be owned by the pledgor.
It must be capable of being delivered; it must be free from encumbrances.
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pledge :
A pledge becomes a concluded contract by the offer and the acceptance of the pledgor and pledgee. The offer and acceptance must be absolute and in definite and decisive language.
The acceptance must agree with the offer.
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property:
One pledge may be exchanged for another.
It is lawful to increase the debt that is secured by the pledge.
One pledge can be taken as security for two different debts from two different creditors.
A borrowed property can be used as a pledge
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the pledge until its redemption.
(vi) A pledge does not become necessary to
be returned when the debt is partly paid
off. The pledgee has a right to hold it
until the debt is paid in full.
(vii) It is invalid for the pledgor or pledgee to
sell or pledge a pledged property without the
others’ consent.
pledge.
(ix) The pledgee may on his own accord, release the
property from the pledge.
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The term Dhaman is usually used in respect of debt
(money or property) and there are five essential
elements, namely:
Dhamin (guarantor)
There are seven necessary conditions that must be met in
Dhaman.
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(ii) He must not be prohibited from dealing with his
property.
- Creditor and debtor must be known to the guarantor.
*
follows:
(ii) It must be obligatory, i.e. an obligation on the
debtor
Contract
decisive language.
Muwakkil (principal)
Wakil (agent)
Muwakkal bih (business or work for which the agent is
appointed to do), and
essential elements.
There are three conditions relating to principal and agent
as follows:
They must be capable of taking responsibility
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(3) Business or Work
The business or work that is to be done by the agent
must meet three necessary conditions as follows:
(i) The property or right must belong to the principal
(ii) The business or work may be performed by
another person
known
contract.
language.
which the agent is to perform may be general or
specific. If it is specific, it must be specified in the
contract.
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Duties of An Agent
- An agent is a safe custodian for the things that is
entrusted to him before delivery to the principal
or a third party.
- Contracts of an agent is incumbent on his principal in
the following matters:
Mudharabah
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(1) Depositor
(2) Custodian
essential elements.
- Depositor and custodian must be capable of taking responsibility.
(3) Deposit
(i) It must be capable of being managed by the
custodian.
(ii) It must be capable of being stored; it must not be
perishable.
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1. Wadiah Yad Amanah (trustee safe custody)
2. Wadiah Yad Dhamanah (guaranteed safe custody)
In Wadiah Yad Amanah the custodian must safeguard the deposit by
these three ways:
Not mixing or pooling the deposits of the different depositors under his custody
Not using the deposits; and
Not charging any fees for safe custody
If he failed in any of the above Wadiah changes to Yad Dhamanah
where:
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Ibraa’ arises out of a deferred payment sale where the
buyer makes an early redemption.
Ibraa’ has five essential elements, namely:
Creditor (seller)
Debtor (buyer)
Contract
The necessary conditions of creditor and debtor are the
same as those of buyer and seller in a contract of sale.
(3) Debt
The debt as the selling price must meet these two
necessary conditions:
There are two ways of dealing with Ibraa’, i.e:
It must not be stated in absolute amount or percentage in the asset sale agreement; or
It may be stated in the ASA in an absolute amount and a known currency. When this is done there will be two prices in the contract and the seller (creditor) is entitled to the lesser of the prices only. It is then invalid and forbidden for the seller to withdraw the Ibraa’
(5) Contract
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