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By Atiyyah Kariem

Contemporary Issues in Islam


Islam’s Climate for Business Success

What does it take to be an entrepreneur in operating your own business successfully in a country like the United
States that has so much drama, racism, bigotry, and presumptions from an Islamic stand point, so I chose this
book “Islam’s Climate for Business Success by Warith Deen Mohammed to read.
While reading Islam’s Climate for Business Success it pointed out that business and entrepreneurship has to be a
natural to individuals and a need to community dignity and self-respect, as well as for producing and continuing
means of support for our families.
The book talks about business from an Islamic perspective. Principles of Al-Islam are involved as encouragement
for growth. He combines the concepts of fairness in trade and sound family units or relations as outstanding
examples in Islamic values. He uses this as a tool that are useful and can be applied by anyone and always
addresses the need to keep our Creator (Allah) first and foremost, but not to forget at the same time that we still
have to make a living, we have to do Business. Imam Warith Deen Mohammad talks about the need to understand
yourself in order to do Business. Regardless if you are a student or are working, this book, if used correctly will
help improve your life. He explains in detail the (5Ws) who, what, when where and why of conducting your
business as it relates to the Quran.
The concepts in this book are key to assisting us, not only Muslims will benefit from this book, but a lot of people
will benefit in developing and sustaining businesses that are useful to our communities and the nation we live in.
He looks at the Islamic perspective on business development, work and the society and-economy. As he expresses
in his book economics begins with the establishment of true vales and ends with values that establish truth and
social justice.  We have to self-invest in family and have a balance in our lives. In order to have a climate for
business success we have to work on ourselves first. This is a good book to read.
Qur’an Shariah
IS L A IN T RO
MIC
B US D UC T
IN E S I ON
S AN
Riba DF INAN
CE

na h
S un
“This day I have
perfected your
religion for you,
completed My favor
upon you, and have
Introduction chosen Islam as
your way of life”
(Qur’an 5:3). The
meaning of the word
Islam is ‘submission’
Introduction to Islam Business and Finance

• When we speak of Islamic Finance or Islamic economic principles, it is


generally assumed that these principles are emphasized by Muslim
scholars only to satisfy the religious requirement of Muslims, or that
they are meant only for Muslims to the exclusion of all others.
INCORRECT ASSUMPTION
• Islam is basically represented by a set of beliefs,
• benefits of its social, political and economic principles are not restricted to
Muslims;
• meant for the common good of humanity at large.
What is Islamic Banking?

“an Islamic bank is a financial Also, the Malaysian Islamic Thus, Islamic banking is
institution whose statutes, Banking Act 1983, defines an banking that complies with
rules and procedures states Islamic bank as Shari’ah or Islamic law.
its commitment to the
principle of Shariah and to
the banning of the receipt
and payment of interest on
any of its operation…” “… a company which carries on
Islamic business. Islamic business
means banking business whose
aims, and operations do not
involve any element which is not
approved by the religion of
Islam…”
The banking business
1. Bank is an authorized deposit-taking institution (ADI)
2. Facilitates intermediation between savers and investors.
3. Transfer funds from surplus units to deficit units.
4. It manages payments and clearing systems (EFTPOS, Cards,
BPAY, Cheques,…)
Islamic and conventional banking
• The prohibition of riba (interest, usury), gharar (excessive
uncertainty) and haram (impermissible) activities.
• The implementation of profit and loss sharing (PLS) principle.
• The emphasis on productivity and real economic activity (rather
than credit worthiness).
ISLAM BUSINESS AND FINANCE

• Ibadaat – Acts of Worship


• Ibadaat are based on the individual’s direct relationship with God.
• Entails that specific acts of worship must be directed solely for Allah (God)
alone with sincerity.
• Includes one’s Prayers, Fasting, Pilgrimage etc.
• Mu’amalaat – Interactions with People
• refers to the conduct one has with fellow human beings.
• Law, work, marriage, inheritance, business transactions, partnerships,
buying, selling etc.
• Islamic finance and banking falls under this category.
• Conduct is in conformity with Shari’ah principles.
• Objective of human life is to please GOD – Almighty Allah via Ibadaat and
Mu`amalaat.
Basis of
Islamic
Banking and
Finance
The Qur’an
• The first source of the Shari’ah
• General and specific rules on religious, commercial,
Basis of political, economic, legal and social rules

Islamic • Emphasis on mutual consent and agreement


among consenting parties
Banking • Prohibits exploitative measures:
• Excessive risk or uncertaintly (gharar)
and • Usary or interest (riba)
Finance • Prohibits cheating and corrupt practices in the
management of funds
• Does not allow dealings in prohibited products
The Sunnah

• The Sunnah
• Sunnah literally means way and therefore refers to the way of the Prophet.
• Another word sometimes used with Sunnah is Hadith
• (speech, statement or saying).
• books of Hadith are referred to as the Sunnah as they are collections of the
statements, actions and approvals of the Prophet Muhammad - PBUH.
• The Sunnah is collected in many volumes of Hadith books.
• Hadith can be used to help explain and elaborate on the Qur’an.
• Sunnah contains rulings and guidance on all kinds of issues and circumstances.
• There are over forty verses in the Qur’an which command faithfulness to the way of
the Prophet (his Sunnah).
COMPONENTS OF SHARIAH

SHARIAH

AQIDAH FIQH AKHLAQ


(Faith & Belief) (Practices & Activities) (Moralities & Ethics)
Concerning faith and beliefs Concerning practical actions in manifesting his faith Concerning behaviour, attitude and
in ALLAH and His will and beliefs work ethics in taking practical actions

IBADAT MUAMALAT
(Man-to-God Worship) (Man-to-Man Activities)
Concerning practicalities of his worship Concerning practicalities of his daily life in
of ALLAH various forms of man-to-man activities

POLITICAL ECONOMIC SOCIAL


ACTIVITIES ACTIVITIES ACTIVITIES
SOURCES OF SHARIAH- Secondary
Three Topic Customs in Islamic Finance

1. The Prohibition of Riba (Interest or Usury) – Money is not to be


exchanged for money with profit.
• solutions are given which encourage trade and equity participation.
2. The Prohibition of Gharar (Uncertainty) –
• demands transparency in contracts as well as in buying and selling.
• Prices should be specified,
• clarity of the delivery details,
• quality of goods, quantity of goods etc.
• information should be available to all parties involved and the outcomes of a contract
should be free from ambiguity etc.
3. Sanctity of Contract –
• Contracts should be fair and agreed upon by both parties.
• contract should be free from the elements of Gharar and reach Shari’ah approval in their
content.
Riba ‫ربا‬
(‫ال‬ (Interest or Usury)
• Riba strongly prohibited in Islam
• “Allah has permitted trade and forbidden riba” (Surah AlBaqarah 2:2751
• Verses prohibiting riba found in 4 Surahs
• Al-Baqarah 2:275-276, 278-280
• Aal Imran 3:130
• An-Nisaa 4:161
• Ar-Room 30:39
• Several Hadiths explain detail surrounding riba
• Narrated by the Prophet’s companion Jaabir: “Allah messenger cursed the one who
accepts riba, the one who gives it, the one who records it and the two witness to it
saying they are all the same” (Collected by Muslims)
OTHER ELEMENTS NOT APPROVED UNDER ISLAM

Riba (interest/
usury)
GHISH
Forbidden Gharar (Excessive
concealment of uncertainty)
information.
Transparency is vital

Maysir
Producing and (Gains from game of
trading in “Haram” chance i.e.
goods/activities gambling)
Ihtikar
(Hoarding to bid-up
prices)
The Prohibition of Riba The Prohibition of
(Interest or Usury) Gharar (Uncertainty)

• Definition of Riba: ‫ربا‬ '‫ال‬ • Gharar has a broad scope and is not limited
• Riba in the Arabic language literally means to one simple definition. For our purposes
increase. However, according to the specific here, it relates to
Shari’ah definition, it means unlawful • excessive uncertainty or ignorance by way
increase ‫محرمة‬ (‫ ا(لزيادة ال‬. Under today’s of a contract, or the goods involved in a
literature and terminologies, riba commonly
refers to interest and usury. sale, the price, ownership, possession of
goods, deliverability, dates of exchange etc.
• Riba is one of the core concerns in Islamic
finance. In order to avoid riba, many financial • A hadith collected by Muslim narrated by
alternatives have been adopted over the Abu Hurairah states, “The Prophet forbade
centuries. selling by way of tossing stones to settle a
• Sincere Muslims to refrain from riba is to sale (Al-Haasah), and the sale of Gharar
conform to what the Law Maker has
legislated.
The Era of the Prophet

Origins and The prevailing modes of transactions during this era include:

Historical
Overview of
Shirkah (partnership) based on profit-and-loss sharing (PLS)

Islamic Al qard Al hasan (benevolent loan)

Banking Salam (Forward) contract

and Sarf (exchange of money), i.e. gold for gold and silver for silver at the

Finance
same sitting

Ijarah (leasing)

Trans-regional trade involved trade caravans from Mecca to Syria and


vice versa
Timeline of Modern-day Experiments of

Islamic Banking and Finance from 1962 to 1975

Timeline of Modern-day Experiments of


Islamic Banking and Finance from 1962 to 1975

• Initial Reforms in the Banking Industry in Pakistan in 1962

• Mit Ghamr Local Savings Bank in Egypt of 1963 (“the first modern-day trial of Islamic
baking”)

• The Malaysian Pilgrims Savings


Board, Tabung Haji of 1969
(managing savings of prospective
pilgrims by investing in Sharī’ah-
compliant investments)

• The new birth of modern Islamic finance took place in Dubai in 1975 through Dubai
Islamic Bank as the first Islamic commercial bank in the world. At the same time, IDB
established and started Islamic Finance.
Islamic Banking and Finance around the
world (And Many More)
Key 6 principles of Islamic banking
1. Prohibition of predetermined loan repayments as interest (riba)
2. Profit and loss sharing,
• which is at the heart of the Islamic finance system
3. Making money out of money as being unacceptable, with all
financial transactions needing to be asset-backed
4. Prohibition of speculative behavior
5. Only Shariah approved contracts being acceptable
6. The sanctity of contracts
Ethics in Islamic Finance and Banking
"Assist one another in righteousness and piety. And do not assist one
another in sin and transgression…" (Qur’an 5:2)

• Two objectives of Islamic finance and banking:


• to assist in the spread of economic prosperity.
• to do this in accordance with Shari’ah principles.
• Norms concerning Islamic finance:
• free market, where prices are determined by demand and supply,
• freedom from manipulation,
• prevention of hoarding,
• profit and loss sharing in partnerships,
• information efficiency etc.
Cites:
• Development of the Islamic Banking System - jibfnet.com

• https://www.researchgate.net/publication/280302830_Introduction_
to
Banking and Finance
• https://prezi.com/1dl8c_pca8z4/islamic-banking/#
• Writings : Haji Razli Ramli | Islamic Bankers Resource Centre
Writer that battles to promote, explain and create awareness about Sharia
Compliant Banking