Shariah-CompliantShariah-Compliant

Make Make Yourself Yourself

Why is Shariah-ComplianceImportant?    • Our lifelong objective is to seek the pleasure of Creator

• ‘Islam’ is a complete ‘way of life’ – What does this Mean?

• The Muslim Code of Life – stipulated from Quran and Sunnah

• More than just Ibadah!

• Widespread ignorance of Mu’amalat matters 

• The subject matter of any transaction must be Shariah-compliant

• The transaction must not involve any interest based lending or borrowing

• Contemporary contracts fall foul of Shariah Principles in FOUR key areas

Three Basic principles of Shariah-Compliance    

Basic principles of Shariah-Compliance

I. Penalty clauses which require the householder to pay interest charges if they default on payment

II. Seller not having possession/ ownership of goods or selling something that is not in existence yet – e.g. financial markets such as derivatives and options and short selling

III. Contracts must be devoid of excessive uncertainty (gharar)

IV. Contracts must not be interlinked so as to form a contract within a contract

Contracts - Four Key Issues

• Why are conventional mortgages not permitted?

• How do Islamic Home Purchase Plans differ?

• Who provides Islamic Home Purchase Plans?

Mortgage Alternatives (Islamic Home Purchase Plans)

SOME KEY CHALLENGES:

(1) Type of Shirkah (aqd / amwal etc.)

(2) Contract within a contract

(3) Rental rate being similar to interest rate

(4) Spirit vs Letter of Shariah

 Islamic Bank Accounts

• Why are conventional bank accounts not permitted?

• How do Islamic bank accounts differ?

• Diminishing Musharaka ?

• So who provides Islamic bank accounts?

SOME KEY CHALLENGES:

• Centrality of constructive possession • Spirit vs Letter of Shariah

•  What’s WRONG with conventional investments?

• So how do Shariah-Compliant investments work?

• Who provides Islamic Investments?

KEY CHALLENGE:

• Rationale behind 5% and 33%

Investments, Pensions & Child Trust Funds (CTF)  

• What is WRONG with a conventional personal loan? • How does an Islamic loan work?

• What is Tawaruk and how does it work?

SOME KEY CHALLENGES:

• Why is it controversial? Is there an alternative?

• Also need to consider if the underlying need for the loan is valid

Personal Loans

• Are normal leases haraam?

• Responsibilities of lessor & lessee

• Penalties on default

• Interlinked contracts    

KEY CHALLENGE:

• Differentiating behind a Faasid condition and a void contract

• Where does bending the rules differ from breaking the rules?

Car & Equipment Leases

   

• So what’s WRONG with conventional insurance?

• So how does Islamic insurance work?

• Takaful ?

• What about those scholars who view conventional insurance as permitted?

SOME KEY CHALLENGES:

• How to resolve key issue of Gharar?

• Aqd Tabarru and debate around this

Insurance & Takaful

• Are warranties considered to be insurance? 

• Are conventional credit cards acceptable?

Some key challenges:

• What is the difference between a guarantee, a warranty and insurance?

• Is breakdown cover insurance, a guarantee or a warranty?

• Is there a difference between pre-paid cards / debit cards and credit cards?

Guarantees, Warranties & Credit Cards

Summary

1. Zakah and Islamic Wills to be covered via dedicated session

2. Each of the areas could easily have it's own dedicated session

3. Each of above areas is a challenge British Muslims have to overcome if we want to submit to Shariah with regards to financial and legal matters

4. Widespread ignorance is prevalent not only amongst Muslim community but also amongst Scholars on these matters

Key outcomes of this session are to:

• Raise awareness of some of the key legal / financial areas where Muslims need to be aware of Shariah principles to either avoid a clear haram or to fulfill a Fardh Ain obligation

• To suggest ways for further study as this session is simply to raise awareness and each area needs more research

• Most importantly for you, the audience to recognise that disseminating and implementing this knowledge amongst the community is a personal challenge!

Any Questions ?