Shari’ah Rulings on

Investment

Prof. Dr. Mohd. Ma’sum Billahwww.drmasumbillah.blogspot.com

Investment

Why we invest? To obtain a benefit further away in the

future.

What to invest in? Physical assets Financial assets

Shari’ah Rulings in Investment Contracts

Investments Should Only Support Halal Activities

�َل�ى �َه�ا ِإ ! ِب $وْا $ْد!َل �اِط�ِل� َو�ُت !َب �اَل $م ِب �ُك !َن �ْي $م ِب �ُك ْم!و�ْاَل� ! َأ $وْا $ُل !ُك �ْأ � ُت َو�َال

� !م �ْث �اِإل 8اِس� ِب ْم!و�ْاِل� ْاَلَن� ! َف�ِر�يًق>ا ْم;ْن! َأ $وْا $ُل !ُك �ْأ �َت � َل 8اِم !ُح$ُك ْاَل

�ُم$وَن� �ْع!ُل $م! ُت �نَت َو�َأ (Al-Baqarah: 188)

“And eat up not one another's property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.), nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully".

Prohibition of Interest (Riba)

�ْض!ْع�اَف>ا �ا َأ ِب ! ْاَلِر; $وْا $ُل !ُك �ْأ � ُت ! َال $وْا 8ِذ�يْن� آْم�َن Kَه�ا ْاَل ي� �ا َأ ي

�ُح$وَن� $ْف!ُل $م! ُت 8ُك �ْع�ُل Nَه� َل ! ْاَلُل 8ًق$وْا ْمKَض�اَع�ْف�ًة> َو�ْاُت (Ali `Imran: 130)

“O you who believe! Eat not Riba (usury) doubled and multiplied, but

fear Allah that you may be successful”.

~ Shari’ah Rulings in Investment Contracts

 

Gharar (Uncertainty or Speculation) Is Prohibited

�نَص�اُب$ ِر$ َو�ْاَأل �!ِس !ُم�ْي !َخ�ُم!ِر$ َو�ْاَل 8ُم�ا ْاَل �ن ! ِإ $وْا 8ِذ�يْن� آْم�َن Kَه�ا ْاَل ي� �ا َأ ي

$وُه$ �َب �َن َت !َط�اَن� َف�اْج! ْي �ِم$ ِر�ْج!ٌس] ْم;ْن! َع�ُم�ِل� ْاَلَّش8 َال �ْز! َو�ْاَأل�ُح$وَن $ْف!ُل $م! ُت 8ُك �ْع�ُل َل

(Al-Maidah: 90) “O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al

Ansab, and Al Azlam (arrows for seeking luck or decision) are an abomination of Shaitan's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful”.

~ Shari’ah Rulings in Investment Contracts

~ Shari’ah Rulings in Investment Contracts

Preserve the Unity of Mind and Sincerity in Investment Contracts and Dealings

>ا $ِر� ْم�ًق!َت �َب $وَن� ُك �ْف!ْع�ُل $وَن� ْم�ا َال� ُت �ًق$وَل �م� ُت $وْا َل �ْم�َن 8ِذ�يْن� آ Kَه�ا ْاَل ي� �ا َأ ي

$وَن� �ْف!ْع�ُل $وْا ْم�ا َال� ُت �ًق$وَل �َن ُت 8َه� َأ َع�َنْد� ْاَلُل (As-Saff: 2-3)

“O you who believe! Why do you say that which you do not do? Most hateful it is with Allah that you say that which you do not do”.

~ Shari’ah Rulings in Investment Contracts

Every contractual party should honour contractual promises

�!ْع$ًق$وِد �اَل ! ِب َو!َف$وْا� ! َأ $وْا 8ِذ�يْن� آْم�َن Kَه�ا ْاَل ي

� �ا َأ ي

(Al-Maidah: 1)

"O you who believe! Fulfill (your) obligations”

 ~ Shari’ah Rulings in Investment Contracts

Every Transaction Must Be Performed With Utmost Good Faith and Mutual Goodwill

$م! �ُك !َن �ْي $م! ِب �ُك ْم!و�ْاَل� ! َأ $وْا $ُل !ُك �ْأ � ُت ! َال $وْا 8ِذ�يْن� آْم�َن Kَه�ا ْاَل ي

� �ا َأ ي$م! ْاٍضa ْم;َنُك �ِر� ًة> َع�ْن ُت �َج�اِر� $وَن� ُت �ُك �َن ُت 8 َأ �َال �اِط�ِل� ِإ !َب �اَل ِب

(An-Nisaa: 29) O you who believe! Eat not up your property among yourselves unjustly

except it is a trade amongst you, by mutual consent.

Guidelines of Islamic Investment

Making Money from Money is not Permissible;

Profit and Loss Sharing;

Complete segregation of funds;

The existence of a Shari’ah supervisory board;

Management committed to Islamic financial concepts;

Safeguarding Muslim investors' funds from negligence, trespass, and fraud;

Compliance with the standards of the AAOIFI.

Guidelines of Islamic Investment

Principles of Islamic Investment

Profit-sharing Musyarakah$وْا 8ِذ�يْن� آْم�َن �َال8 ْاَل �ْع!ٍضa ِإ �ْع!َض$َه$م! َع�ُل�ى ِب !ِغ�ي ِب �َب �ْي !َخ$ُل�َط�اء َل ْا ْم;ْن! ْاَل �ْيِر> �ِث �َن8 ُك َو�ِإ

��ُح�اِت $وْا ْاَلَص8اَل َو�َع�ُم�ُل(As-Shaad:24)

"And, verily, many partners oppress one another, except those who believe and do righteous good deeds”

MudharabahHoly Prophet pbuh:‘The hands of Allah will always work together with the two parties in the

partnership so long as they do not betray one another’

Principles of Islamic Investment

Deposits

Al-Wadi’ah

Maintain the trust and deliver the trusted items to its beneficiary

�َذ�ْا �َه�ا َو�ِإ ْه!ُل� �َل�ى َأ �اِت� ِإ �ْم�ان ! ْاَأل $ؤِدKَوْا �َن ُت $م! َأ ُك ْم$ِر$

! �ْأ Nَه� ي �َن8 ْاَلُل ِإ�ْع�ُم8ا Nَه� ن �َن8 ْاَلُل !ْع�ْد!ِل� ِإ �اَل ! ِب $ُم$وْا �ُح!ُك �َن ُت 8اِس� َأ !ْن� ْاَلَن �ْي $م ِب �ُم!َت َح�ُك

��َه $م ِب �ْع�ُظ$ُك ي(An-Nisaa: 58) “Verily! Allah commands that you should render back the trusts to those, to whom

they are due; and that when you judge between men, you judge with justice…….”.

Principles of Islamic Investment

Sale & Purchase Bai’ Al-Murabahah (Deferred Payment Sale)

Prophet Muhammad pbuh;

‘Blesses are on these three: deferred sale and purchase, mudharabah & mixing flour for the household not for sale’

(Ibnu Majah)

Principles of Islamic Investment

Bai’ al-Salam (In-Front Payment Sale)

aْج�ِل� َأ �ى �َل ِإ aْن! �ْد�ي ِب $م �َنَت �ْد�ْاي ُت �َذ�ْا ِإ ! $وْا آْم�َن 8ِذ�يْن� ْاَل Kَه�ا ي� َأ �ا ي

$وُه$ $َب !َت َف�اُك ُم�ى ْمKِس�

(Al-Baqarah:282)

“O you who believe! When you contract a debt for a fixed

period, write it down….”

Principles of Islamic Investment

Bai’ al-Istisna’ (Purchase by Order or

Manufacture)

According to Hanafi’s mazhab, bai’ al-Istisna’ is permissible based on the following reasons:

It is a common practice in the society (`urf) The need of society (public interest) Not against any of the Shari`ah rulings

Principles of Islamic Investment

Al-Ijarah (Leasing)

�َذ�ْا ِإ $م! !ُك �ْي َع�ُل �اَح� َن ْج$ � َف�َال $م! �ِد�ُك َو!َال� َأ ! ْض�ْع$وْا �ِر! َت �ِس! ُت �َن َأ Kم! ِدُت ِر�

� َأ �َن! َو�ِإ�َن8 َأ ! �ُم$وْا َو�ْاَع!ُل Nَه� ْاَلُل ! 8ًق$وْا َو�ْاُت �َوِف !ُم�ْع!ِر$ �اَل ِب $م !َت �ْي آُت ْم8آ $م 8ُم!َت ُل َس�

�َص�ْيِر] ِب $وَن� �ْع!ُم�ُل ُت �ُم�ا ِب Nَه� ْاَلُل

(Al-Baqarah:233) “And if you decide on a foster suckling-mother for your

children, there is no sin on you, provided you pay (the

mother) what you agreed (to give her) on reasonable basis.

And fear Allah and know that Allah is All-Seer of what you

do.”