Muslims Trading with Other Countries?

My question is regarding trade. As far as I know, in Islam it is allowed to do trade with Christians, Jews (Book Holders) Today most of the Muslim countries do their businesses with Japan, Korea and those countries which are neither Jewish or Christian. Is this right? Secondly, the goods that Muslim country buy from these countries is sold in local markets. Are Muslim masses allowed to buy these goods?

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad sallallaahu `alayhi wa sallam (may Allaah exalt his mention) is His slave and Messenger.

In principle, it is permissible for a Muslim to buy from Jews, Christians, polytheists, and all other non-Muslims or to sell them goods within the limits of the Shari’ah.

However, any involvement in Riba (interest and/or usury), selling pork and the like are forbidden. Therefore, there is no harm to purchase their food, drinks, garments, means of transport, etc. as long as they do not contain any prohibition of the Islamic Shari’ah.

Allaah Knows best.

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Whether a Partner in Business Partnership is Entitled to Salary?


Assalaamu alaykum.
‘A’ brought a business concept and requested me to invest. Me and two friends agreed to invest. ‘A’ agreed to manage the business. ‘B’ is a finance professional and agreed to look after the finance management. ‘C’ is a marketing professional and agreed to support marketing.

  1. Who is the owner of the business?; only ‘A’, or all partners? Is ‘A’ allowed to take a monthly amount as salary;
  2. How do we consider the role of ‘B’ and ‘C’? Are they entitled to any payment?;
  3. How should their role be considered while sharing the profit?

I kindly accept your feedback. May Allah bless you.

All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger

Your question included several points, and we will answer them in the order in which you mentioned them:

The first question: Who is the owner of the business? Is it person (A) alone, or all partners? The answer is: the business is a joint venture (partnership) between the three if (A) will invest the money of (B) and (C) and will work with the money against a percentage from the profit that will be agreed upon in the contract. He does not have a salary. The partnership, in this case, will be called Mudhaarabah [as underlined in fatawa 5160 and 276166]: (A) with his effort and the two others, (B) and (C), with their money and their work.

However, if (A) will be given a specific salary for his effort and his investment of the money, then he is a hired person (employee) and not a partner; the business, in this case, is between (B) and (C), who are partners with their money and their work.

The second question: Is it permissible for the person (A) to take a sum of money each month as a monthly salary? The answer to this is that if (A) is a partner, then it is not valid that he will be given a specific salary; rather, he takes a percentage from the profit only, if there is any profit, in return for his work.

Ibn al-Munthir said, “All the scholars that we know of unanimously agreed upon the invalidity of profit-sharing if one or both parties stipulate a designated number of dirhams for themselves.”

However, if he only works and has nothing to do with the partnership, then he is given a known salary.

The third question: How do we consider the role of (B) and (C)? Are they entitled to any payment? How should their role be considered while sharing the profit? The answer is that (B) and (C) are partners in the business and the profit of each of them is according to what was agreed upon (between them) in the contract. If the company is a Mudhaarabah, in a way that (A) will work with them as a partner against a percentage from the profit, then the profit is divided between the three according to what was agreed upon in the contract. Since both (B) and (C) are participating with capital and they both work as well, then each of them is entitled to ask for a salary in return for his work or request an increase in their share from the profit. The author of Ar-Rawdh (a Hanbali book) wrote, “Or that one of them works with his money and he gets a profit more than the profit of.…his money [i.e. the profit he is entitled to according to his share from his money]”.

If the third (A) works as an employee with a salary, then the partnership is between (B) and (C) only and the profit is divided between them according to what they agree upon. If one of them works more than the other, then he may request an additional share from the profit in return for that. In any case, what should be taken into account depends on what they agree upon.

Al-Khiraqi said in his Mukhtasar, “If two persons have a partnership in their effort and the capital of one of them, or two persons in their effort and the money of others, or one person in his effort and the capital of another, or the capital of both of them and the effort of one of them, or the capital and effort of both of them – whether the capital is contributed equally or not – then all of this is permissible, and the profit is divided according to what is agreed upon between them.”

Allah knows best.

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Seeks Advice for Opening a New Business.


I am opening a new shop for electronics goods and I am new to this business. I want to know what are the things I need to do apart from being honest and not cheating so that Allah may bless my business with prosperity and let it flourish. What are the Dua’s or supplications or prayers I need to perform every day in the light of the Qur’an and Sunnah? What should I do when I first open the shop, i.e. are there any supplications or Salat I need to perform every day and what should I do when I close my shop?

Please answer me in the light of the Qur’an and Sunnah and reply soon as my shop is starting this week. I am afraid as whatever I did I did not succeed and this time lots of hard-earned money of my father is being invested. As my father is growing old, day-by-day his strength is diminishing and I need to do something so that my father gets a rest. If I do not succeed my father will have to continue working. Please help me for the sake of Allah and pray to Allah so that my business flourishes and I can give my father the much-required rest.

Praise be to Allah, the Lord of the World; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

Dear inquirer!

We ask Allah, The Exalted, to grant you success Here and Hereafter, to shower you with His blessings and to bless your family and wealth. Know that success is based on the following:

1) Pay Zakat if your business meets the minimum requirements. Make sure to calculate your zakat (by referring to your assets) annually so that you know you need to pay zakat or not. Otherwise, performing charitable activities is recommended.

2) Seeking Allah’s help and supplicating Him since He is The Most Generous. It is proved in the Hadith recorded by al-Tirmizi and Abu Dawood and others that the Prophet (Sallallahu Alaihi wa Sallam) said: “Allah is Modest and Generous, so He does not turn down one’s raised hands (supplicating Him) with failure”.

3) Persevere in truth and sincerity and search for what is Halal, for the Prophetic Hadith: “The seller and the buyer have the right to keep or return goods as long as they have not parted or till they part; and if both the parties spoke the truth and described the defects and qualities of the goods, then they would be blessed in their transaction, and if they told lies or hid something, then the blessings of their transaction would be lost” [Reported by Imam Bukhari ].

4) Seeking the help of experts in the field that you are considering so that they can help you choose successful projects and their best useful means. In this concern, it is proved in the Sunnah that Umm Salamah (Radiya Allahu Anha) said: “Allah’s Messenger (Sallallahu Alaihi wa Sallam) used to say after performing the dawn prayer: ‘O Allah! I ask you for useful knowledge, abundant livelihood and acceptable actions” [Ahmad in al-Musnad].

As for bringing down Allah’s blessings, it is proved in the Sunnah as recorded in al-Musnad from Ali (Radiya Allahu Anhu) that Allah’s Messenger (Sallallahu Alaihi wa Sallam) said: “O Allah! Bless the mornings of my Ummah (people)”.

When you enter a marketing place, you are advised to pray with Allah’s Messenger’s Hadith: “Whoever enters a market place and says: ‘There is no God but Allah, He has not a partner, to Him belongs the authority, His is all Praise, He grants life and causes death, He is The Living One, He does not die, good is in His Hand and He has power over all things; Allah will write down one million good deeds for him (in his account with Him) and cancel one million bad deeds and promote his rank one million degrees more”. Another Hadith reads: “Whoever desires to be pleased with abundance in his provision or that his age be lengthed, should show favor to his blood relatives” [Reported by Imam Bukhari ].

The above-mentioned Hadith states that having good relations with relatives and treating them well brings about more livelihood.

Allah knows best.

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Paying Through Installments?


What are installments?

Definition: It is a postponed payment executed in a fixed number of installments at determined times, with a price higher than the cash price.

Is such a sale allowed? Scholars have two opinions:

1-The first opinion: Many scholars of the Hanafi, Maaliki, Hanbali, and Shafi’i schools of jurisprudence rule that it is allowed. They present the following proofs:

A- This form of sale is an example of the sales that are allowed in the Quran where Allah Says (what means): “…Allah has permitted trade and has forbidden interest…” [Quran: 2:275] And also: “…Except when it is an immediate transaction which you conduct among yourselves…” [Quran 2:282]

B- Some prophetic narrations show the permissibility of the increase above the cash price. For example, the Prophet sallallaahu `alayhi wa sallam (may Allah exalt his mention) ordered ‘Amr bin Al-‘Aas, may Allah be pleased with him, to equip an army, so ‘Amr would buy a camel for the price of two due to the payment being in installments. [Al-Haakim & Bayhaqi]

C- In Islam, trades and transactions are generally allowed, provided they are conducted with mutual consent of the contractors unless the particular type of transaction is specifically forbidden by the Shari’ah (Islamic Law). Since there is no convincing proof that this type of sale is prohibited, it remains allowed. Whoever claims otherwise has to provide proof.

2-The second opinion: This is that of Imams Zayn Al-‘Aabideen ‘Ali bin Al-Husayn and Al-Jassaas (may Allah have mercy upon them) from the Hanafi School of Jurisprudence, as well as others who stated that increasing the price in exchange for postponing a payment is similar to increasing the debt in exchange for postponing its fulfillment. Their proofs are:

A- The verse where Allah Says (what means): “…Allah has permitted trade and has forbidden interest…” [Quran 2:275] means that sales that include an increase of price in exchange for deferring payments are forbidden because they are examples of Riba (interest).

B- The Prophet sallallaahu `alayhi wa sallam (may Allah exalt his mention) has forbidden the addition of extraneous conditions to a sale, or to have two sales in one.

C- There is an analogy of this type of sale with the case where some of the debt is forgiven when the debtor pays before the due date. This would mean that time has compensation, and this is plainly Riba.

D- The increase of price because of the deferred payment is an increase in exchange for nothing in return, therefore it is a case of Riba, which, by definition, means to hike up the price in exchange for nothing.

The majority of the scholars have refuted the above proofs, presented by those who prohibit this sale, as follows:

A-To says that this type of sale is like Riba because of the increase in price is refuted. The Prophet, sallallaahu `alayhi wa sallam (may Allah exalt his mention) has determined the cases of Riba, and some scholars have limited themselves to these cases while others have added other cases they thought were considered Riba because they fulfill the same causes. These cases are, however, the object of disagreement between the scholars. But the matter that is disagreed about in this particular case is beyond what was mentioned by the Prophet sallallaahu `alayhi wa sallam (may Allah exalt his mention) and related cases, for it is about a sale in which the kind of merchandise and the evaluation of the price have differed.

B- To say that Riba means an increase in price is also refuted because almost every sale includes an increase in the price. The abovementioned verse [Quran: 2:275] mentions the unlawfulness of Riba in general, but the types of Riba were enumerated by the Prophet sallallaahu `alayhi wa sallam (may Allah exalt his mention) and they were six types. Sale by installments is not included in these six types of Riba, nor is it included in the types added to them by some scholars.

C- Taking as proof the Hadith (prophetic narration) that forbids two sales in one, or extraneous conditions in a sale, is refuted because the forbidden sales in that Hadith are in fact sales where either the price or the merchandise is not specified, which is not the case of the installment sale.

In conclusion, the most acceptable opinion is the one adopted by the majority of the scholars, which allows this type of sale, because of their strong proofs and because they convincingly addressed the proofs presented by the other side. Also, the common interest of all the Muslims requires that it be accepted due to the benefit for both the buyer and the seller.

Two Fatwas (Legal Rulings) Concerning Instalments:

Question 1: What is the Islamic Ruling concerning the increase in the price when there is a deferred payment executed in installments?

Answer: Payment by installments in sales contracts is allowed if it includes legitimate conditions and permissible if the monetary amount of the installments is defined and the times of payment are fixed; as Allah Says (what means): “O you who believe! When you contract a debt for a specified term, write it down…” [Quran 2:282] And also, due to the Hadith: “Whoever loaned something, let him lend it in a known measure, or a known weight, and for a fixed term.” In addition, we have the authentic story of Bareerah, may Allah be pleased with her, who emancipated herself from her masters in exchange for nine Ooqiyyaat (the plural of Ooqiyyah, one of which is equivalent to three hundred and sixty Dirhams), paying one Ooqyyah a year, and this was a payment in installments, and the Prophet sallallaahu `alayhi wa sallam (may Allah exalt his mention) did not condemn it; rather, he approved of it. [Shaykh Ibn Baaz]

This narration indicates that it is permissible to pay in installments.

Even though the texts state that it is permissible to delay payment, there is no text that explicitly states that it is permissible to increase the price in return for the delay.

Hence, the scholars differed concerning the ruling on this issue. Some scholars said that it is prohibited, on the grounds that it is the same as Riba. They stated that this was due to the increase in price in return for the deferment, which is Riba. On the other hand, the majority of scholars, including the four Imaams, were of the view that it is permissible. The comments of the scholars of the four schools of Fiqh (Islamic Jurisprudence) concerning this include the following:

  • The Hanafi School: “The price may be raised in return for delaying payment,” [Badaa’i’ Al-Sanaa’i’, 5/187]
  • The Maaliki School: “For more time some amount may be added to the price.” [Bidaayat Al-Mujtahid, 2/108]
  • The Shafi’i School: “Five in cash is equivalent to six in deferred payment.” [Al-Wajeez by Al-Ghazzaali, 1/85]
  • The Hanbali School: “Delay adds something to the price.” [Fataawa Ibn Taymiyyah, 29/499]

Question 2: A man living in the United States asks if installments used in car sales that include a fee for deferring payment is allowed. This fee increases when the buyer fails to pay on the agreed due dates.

Answer: If someone sells cars or other merchandise for a known fixed price that is payable by installments that are fixed both in time and amount, in such a way that the price does not change when the fixed time of payment changes (i.e., payment is delayed), then this sale is allowed, for Allah Says (what means): “O you who believe! When you contract a debt for a specified term, write it down…” [Quran 2:282] But if the price of the merchandise increases if an installment is paid after the due date, as it is understood in this question, then this is forbidden by consensus of the scholars because this is a case of Riba, which is mentioned (and explicitly forbidden) in the Quran.

[The General Committee for Religious Research, Fatawa, Da’wah, and Guidance]

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The Ethical Framework for a Muslim Investor

Money, money, money. Doesn’t it make your head spin sometimes? Think of all the things you can do if you just had a little more…

Unfortunately, this compelling greed and need sometimes drives us to make financially unsound decisions, and worse still, even un-Islamic ones. The following article outlines various aspects of Islamic financial dealings, from paying the one you hire to what not to pay when you owe someone. There is so much evidence with regard to Islamic finance that they cannot and must not be ignored. If you ever intend to spend another money, you must read on.

The Hirer and the Laborer
Nothing bonds employees to their place of work more than the fulfillment of their contractual rights, including receiving their wages on time – such treatment fosters loyalty and a sense of belonging as well as financial security for themselves and their family. The Prophet SAW (may Allah exalt his mention) said: “Give the laborer his wages before his sweat dries away.” [Ibn Maajah]. He SAW (may Allah exalt his mention) gave a stern warning to those who do not meet their obligations by saying: “Allah Almighty Said (what means): ‘I will be an opponent to three types of people on the Day of Resurrection: one who makes a covenant in My name, but proves treacherous; one who sells a free person and eats his price and one who employs a laborer and takes full work from him, but does not pay him for his labor.’” [Al-Bukhari].

Our Wealth and Charity
However, the highest among the list of financial obligations is that of our obligation toward our Creator. The rich begin to fulfill this obligation by giving Zakah to the poor and they continue the fulfillment by giving charitable donations whenever needed. Fulfilling one’s obligation towards Allah purifies the capital from inadvertent errors and suspicion, as well as purifies the soul from stinginess and selfishness.

Zakah does not eat away capital, rather it increases it. On the other hand, withholding Zakah is a direct reason for bankruptcy. When people withhold Zakah, Allah withholds rain from them and if it were not for the sake of preserving cattle and wildlife, the rain would cease altogether. Evidence abounds on these issues from both the Quran and Sunnah.

Allah Says (what means): “… And those who hoard gold and silver and spend it not in the way of Allah – give them tidings of a painful punishment. The Day when it (the gold and silver whose Zakah was not paid) will be heated in the Hellfire and seared therewith will be their foreheads, their flanks, and their backs, (it will be said), ‘This is what you hoarded for yourselves, so taste what you used to hoard.’”[Quran, surah at-Taubah: verse 34-35].

Allah also Says (what means): “And those within whose wealth is a known right (Zakah). For the petitioner and the deprived.” [Quran 70:24-24].

And in another verse, Allah Says (what means): “Take, (O Muhammad), from their wealth a charity by which you purify them and cause them increase, and invoke (Allah’s blessings) upon them. Indeed, your invocations are reassurance for them. And Allah is Hearing and Knowing.” [Quran, surah at-Taubah: verse 103].

The Prophet SAW (may Allah exalt his mention) said: “No owner of treasure who does not pay Zakah (would be spared) but (his hoard) would be heated in the Hellfire. These would be made into plates and with these, his sides and his forehead would be cauterized till Allah pronounces judgment among His servants during a Day, the extent of which would be fifty thousand years. He would then see his path, leading either to Paradise or to Hellfire…” [Muslim].

One has only to regard the effect that Zakah has on society to recognize its importance. The money is paid by the rich in order to fulfill their obligation towards Allah, and then used by the poor to relieve their suffering. In a society where giving and receiving are carried out in good faith, the poor live peacefully with the rich in flourishing and stable solidarity. The Prophet SAW (may Allah exalt his mention) gave an example of this society by saying: “When the Ash’arites run short of provisions in the campaigns or run short of food for their children in Al-Madeenah, they collect whatever is with them in a cloth and then partake equally from one vessel. They are from me and I am from them.” [Al-Bukhari].

Avoiding Ribaa (Interest)
A careful analysis of the history of civilizations reveals a common root to all turmoil and political unrest – and that root is usury. This is the reason why Islam took an extremely firm stand on the issue of interest.

Muslim investors should be extremely careful to avoid engaging in transactions involving interest or in any transaction involving interest masquerading as a seemingly lawful transaction.

Allah forbade interest and threatened those who take it with severe punishment, when He Says (what means):

“Those who consume interest cannot stand (on the Day of Resurrection) except as one stand who is being beaten by Satan into insanity. That is because they say: ‘Trade is (just) like interest.’ But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns (to dealing in interest or usury) – those are the companions of the Fire; they will abide eternally therein. Allah destroys interest and gives an increase in charities. And Allah does not like every sinning disbeliever.” [Quran, surah al-Baqarah: verse 275-276].

Allah Almighty declared war against those who take interest and encouraged lenders to be patient with borrowers to the point of absolving them from all, or part, of the loan in the following verse, when He Says (what means):

“O you who have believed, fear Allah and give up what remains (due to you) of interest if you should be believers. And if you do not, then be informed of a war (against you) from Allah and His Messenger. But if you repent, you may have your capital – (thus) you do no wrong, nor are you wronged. And if someone is in hardship, then (let there be) postponement until (a time of) ease. But if you give (from your right as) charity, then it is better for you, if you only knew.” [Quran, surah al-Baqarah: verse 278-281]

Islam’s ruling on taking interest is very straightforward and severe. It is considered to be one of the seven mortal sins. The Prophet SAW (may Allah exalt his mention) said: “Avoid the seven great destructive sins.” The people inquired: ‘O Allah’s Messenger! What are they?’ He said: ‘To join others in worship along with Allah, to practice sorcery, to take the life which Allah has forbidden except for a just cause (according to Islamic law), to eat up Ribaa (usury), to eat up an orphan’s wealth, to show one’s back to the enemy and fleeing from the battlefield at the time of fighting; and to accuse chaste women, who do not have any unchaste thoughts and are good believers.’”[Al-Bukhari].

The Prophet SAW (may Allah exalt his mention) went on to curse the taker of interest, its payer and also the one who records it, including the two witnesses. He SAW (may Allah exalt his mention) said: “They are all equal.” [Muslim].

The Prophet SAW (may Allah exalt his mention) further said: “This night I dreamt that two men came and took me to a holy land whence we proceeded on till we reached a river of blood, where a man was standing, and on its bank was standing another man with stones in his hands. The man in the middle of the river tried to come out, but the other threw a stone in his mouth and forced him to go back to his original place. So, whenever he tried to come out, the other man would throw a stone in his mouth and force him to go back to his former place. I asked: ‘Who is this?’ I was told: ‘The person in the river used to eat Ribaa.’” [Al-Bukhari].

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What the Holy Quran Says About Interest Takers

Interest called Riba’, is prohibited and haram money. Allah SWT has prohibited it and any business that involves giving or taking of interest is also haram. Allah has mentioned about interest and its takers at many places in the Quran and has warned them for their act:

“Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.” [Al-Quran, surah Al-Baqarah, verse 276]

Allah had ordered us to stop the transactions in interest and give charity. When dealt in interest, people strive to earn the most from investing the minimum amount. This causes the imbalance of money supply in the markets. Thus the money circulation stops to only one corner of the society with those who can pay interest and those who know all the tactics to take an interest at every little transaction. We see this happening in society today. There is no money circulation on the society where interest prevails.

But when charity is given, this money is utilized only by those who are poor earners. There is a large number of people who earn less than one dollar daily, so when the charity is paid, money goes down instead of going up, making a complete opposite money circle than is seen in the interest-based society. Money goes down and the level of people’s life standard goes up and equality grows in society. This leads to a balanced economic society and also the expropriation of other’s rights becomes rather impossible. this is just one logic to shun the use of interest there are many others. Allah says in the Quran (which means):

“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.” [Al-Quran, surah Al-Baqarah, verse 278]

This verse is a clear cut message of Allah to those who are Muslims. They cannot deal in interest if they want to be believers.

We should fear Allah and we should fear that torment and that humiliation which could be faced if we do not take care of the money we earn.

This is a very serious problem in our society today because there is no business deal which does not involve interest to be paid or to be taken. Similarly, people in their daily lives, get loans for any purpose, these small or large loans also involve a small or huge amount of interest. Once taken, the borrower will have to pay the interest amount or it will be multiplied with each default. This is how one class of people make all the money and expropriates the rights of others.

In Quran, Allah says that when usury is paid, it does not do any good to society or it does not do any good to that person even, rather it only increases the money of those who already have more than enough by expropriating the rights of others. But if zakat is paid, it does not only earn the pleasure of Allah but also beneficial for the society at large. All the debates on economic realities and political system related to economic justice and all can be thrown to dust bin only by following Quran and Sunnah and by adhering to what Allah has told us to do.

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Earning and Spending Money from The Islamic Point of View

We are living in a time when the Importance of money is more than ever. The desire of living a lavish lifestyle is more than ever due to the Impact of media. Our beloved Muhammad SAW has told us that fitnah of my Ummah is wealth. Quran tells us that our wealth and our kids are a test for us. There is no doubt that human beings love wealth. When they get the wealth they want even more and this desire never ends till we die. Having wealth is not a bad thing if earned and used in the right way.

In fact, earning money through Halal way and hard work is a virtue. Beloved Muhammad SAW said that (which means):

“Honest traders will be in the category of messengers, saints and martyrs on the day of judgment.” [Narrated by Bukhari]

Another hadith tells us that spending money earned through the Halal way on your family is Sadaqah. However, its Haram to make money through methods which are forbidden by our Deen like dealing in Interest, doing dishonesty, lying about the Item that you are selling. using the money for wrong purposes like bribery, corruption is also Haram.

It is also important to give Zakat on the money that you have earned. Zakat purifies your wealth and also ends poverty from the society. along with Zakat, you should also try to do as much sadaqah as you can. The Prophet SAW used to do massive charity.

It is Important to be moderate in spending the money. you should not be wasting the money on unnecessary things and you should also not be a miser. these are some point which we must keep in mind related to Money, earning and spending.

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The Sources of Islamic Economics

An introduction to the principles Islam has legislated to guide the economic system of society. The sources from which the laws that guide economical activity are derived.

As a complete way of life, Islam has provided guidelines and rules for every sphere of life and society.  Naturally, a functioning economic system is vital for a healthy society, as the consumption of goods and services, and the facilitation of this by a common medium of exchange, play a major role in allowing people to realize their material and other goals in life.

Islam has set some standards, based on justice and practicality, for such economic systems to be established.  These standards aim to prevent the enmity that often occurs between different socioeconomic sections.  Of course, it is true that the gathering of money concerns almost every human being who participates in transactions with others.  Yet, while these standards recognize money as being among the most important elements in society, they do not lose sight of the fact that its position is secondary to the real purpose of human existence, which is the worship of God.

An Islamic economic system is not necessarily concerned with the precise amount of financial income and expenditure, imports and exports, and other economic statistics.  While such matters are no doubt important, Islam is more concerned with the spirit of the economic system.

A society that implements Islamic laws and promotes Islamic manners will find that it brings together all the systems – social, economic, and so forth – that it deals with.  Islam teaches that God has created provision for every person He has brought to life. Therefore, the competition for natural resources that are presumed to exist among the nations of the world is an illusion.  While the earth has sufficient bounty to satisfy the needs of mankind, the challenge for humans lies in discovering, extracting, processing, and distributing these resources to those who need them.

Islam consists of a set of beliefs which organizes the relationship between the individual and his Creator; between the person and other human beings; between the person and universe; and even the relationship of the person to himself.  In that sense, Islam regulates human behavior, and one type of human behavior is economic behavior. Economic behavior is dealt with by Muslims as a means of production, distribution, and consumption of goods and services.  In Islam, human behavior -whether in the economic area or others – is not value-free; nor is it value neutral.  It is connected with the ideological foundation of the faith.

The Sources of Islamic Economics

The fundamental sources of Islam – the Quran and the Sunnah of the Prophet – provide guidelines for economic behavior and a blueprint of how the economic system of a society should be organized. Therefore, the values and objectives of all “Islamic” economic systems must necessarily conform to and comply with, the principles derived from these fundamental sources. The purpose of these articles is to outline the most salient characteristics of an economic system based on the fundamental sources of Islam.  The focus here is on the principal features of the Islamic system.

The Islamic economic system is defined by a network of rules called the Shariah. The rules which are contained in the Shariah are both constitutive and regulative, meaning that they either lay the rules for the creation of economic entities and systems, as well the rules which regulate existing one. As an integral part of the revelation, the Shariah is the guide for human action which encompasses every aspect of life – spiritual, individual, social, political, cultural, and economic.  It provides a scale by which all actions, whether on the part of the individual agents, society and the state, are classified in regards to their legality. Thus there are five types of actions recognized, namely: obligatory; recommended; permissible; discouraged, and forbidden.  This classification is also inclusive of economic behavior.

The basic source of the Shariah in Islam is the Quran and the Sunnah, which include all the necessary rules of the Shariah as guidance for mankind.  The Sunnah further explains these rules by the practical application of Prophet Muhammad, may the mercy and blessings of God be upon him.  The expansion of the regulative rules of the Shariah and their extensions to new situations in later times was accomplished with the aid of consensus of the scholars, analogical reasoning – which derived rules by discerning an analogy between new problems and those existing in the primary sources – and finally, through textual reasoning of scholars specialized in the Shariah.  These five sources – the Quran, the Sunnah, the consensus of the scholars, analogical reasoning, and textual reasoning – constitute the components of the Shariah, and these components are also used as a basis for governing economic affairs.


In summary, we can say that the Islamic Economic system is based upon the notion of justice  It is through justice that the existence of the rules governing the economic behavior of the individual and economic institutions in Islam can be understood.  Justice in Islam is a multifaceted concept, and their several words exist to define it.  The most common word in usage which refers to the overall concept of justice is the Arabic word “adl”.  This word and its many synonyms imply the concepts of “right”, as equivalent to fairness, “putting things in their proper place”, “equality”, “equalizing”, “balance”, “temperance” and “moderation.” In practice, justice is defined as acting in accordance with the Shariah, which, in turn, contains both substantive and procedural justice covering economic issues.  Substantive justice consists of those elements of justice contained in the substance of the Shariah, while procedural justice consists of rules of procedure assuring the attainment of justice contained in the substance of the Law.  The notion of economic justice and its attendant concept of distributive justice is particularly important as an identifying characteristic of the Islamic economic system.  The rules governing permissible and forbidden economic behavior on the part of consumers, producers, and government, as well as questions of property rights, and of the production and distribution of wealth, are all based on the Islamic view of justice.

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About Debt. Muhammad was Right.

Taken with changes from Roger Scruton is a writer and philosopher living in England. His many books include Beauty and The Uses of Pessimism and the Danger of False Hope. Learn more about him at

Everybody has an opinion about what we ought to do to fix our dreadful financial situation. Here’s a thought: why not listen to Muhammad? True, the Prophet did not hold an economics degree, nor was he a fixture on noisy cable chat shows about finance. Times have changed since the seventh century. But Muhammad knew a thing or two about human nature, which has not changed. A verse of the Qur’an says (which means):

“O you who have believed, do not consume one another’s wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves [or one another].” [Al-Quran, surah an-Nisa’, verse 29].

This is one of many verses and hadiths interpreted as forbidding interest, insurance, and the trade in debts. The Prophet was appalled by the sale and purchase of unreal things, especially when people sought to forestall the will of God by selling something that they did not possess or which they might never be called upon to provide. Traditional Islamic law, therefore, forbids many of the commercial constructs that we take for granted: for example, limited liability, which permits people to escape from the consequences of what they do by wearing a corporate mask.

Of course, an economy without interest, insurance, limited liability, or the trade in debts would be a very different thing from the world economy today. It would be slow-moving, restricted, and comparatively impoverished. But that’s not the point: the economy proposed by the Prophet was justified not on economic grounds but on moral grounds, as an economy of righteous conduct. Nor is the desire for a moral economy confined to Islam. In the postwar world in which I was raised, economic life was equally circumscribed by moral edicts.

For a long time following World War II, something called “capitalism” was regarded with great suspicion by European elites and also by large sections of the people. Capitalism meant “greed,” “profiteering,” and “exploitation.” Private business was regarded as an assault on public assets, if not on public morals, and in the England of nationalized industries and massive state projects, it was rare to find the “profit motive” referred to except as an object of abhorrence.

Then came the Thatcherite revolution. We lived through what was, in retrospect, a radical transformation in the world of ideas and also in day-to-day politics. Quite suddenly the system that had been condemned as capitalism was being praised as “the market.” Economics, we were told, was not about profit and exploitation but about freedom. The market was not just a social necessity but a moral good. It was the system whereby each person dealt openly and honestly with every other, to the benefit of everyone. It offered freedom and demanded responsibility as the price. The state was no longer the guardian of the common good but the great intruder, the free rider on all our contracts, the robber who took the proceeds of honest workers and distributed them to its pampered clients. After the dreary years of socialist Puritanism, this new morality was undeniably liberating. But it liberated both good things and bad, and never faced up to the truth that had dawned on Muhammad — the truth that, in an economy of fictions, nobody can be called to account.

Whether bubbles of the kind we have recently seen are a necessary part of the trade in the unreal estate, I do not know. I suspect that they are and that the search for regulations that would prevent them is a futile use of public funds and political energy. Nobody can enjoy the sight of people becoming stinking rich by trashing the scant savings of others. But matters are not improved when the state steps in. The underlying premise of state interference is that the state and its clients come first. The main concern of the political class is to ensure that those on whom it immediately depends for an easy life — the bureaucrats and the clients — will be properly provided for, with a reserve fund to buy favor from the discontented. The trade in unreal estate goes on.

The European norm, in which the largest part of the economy is controlled by the state, represents a kind of default position of modern democracies, and one to which the U.S., long the exception in Western politics, is now tending. High taxes on all who work hard, take risks and keep the economy going, combined with a free ride for all those from whom votes can be most easily purchased — such is the tendency of the democratic state. Nobody in Greece or Portugal has ever doubted it, and only a residual glimmer of the Protestant work ethic has distracted the Germans from the truth that they are not really entitled to complain when the Greek political class tries to transfer the cost of its borrowing, which it cannot pay, to the German taxpayer, who can. For that is what social democracy means, and social democracy has been Germany’s greatest postwar export.

Many economists write learned and technical articles to explain how the current debt crisis arose and how it might be managed. The theory of refinancing and sovereign debt fills many a volume of innocent-seeming graphs and statistics. But this should not blind us to the truth that dawned on the Prophet, which is that we have another and truer way of perceiving these matters: the way of moral judgment. If you borrow money, you are obliged to repay it. And you should repay it by earning the sum required, and not by borrowing again, and then again, and then again. For some reason, when it comes to the state and its clients, those elementary moral truths are forgotten. You may say that there is a disconnect here between economic and moral wisdom. I am not convinced of that. It seems to me that the moral sense emerged in human beings precisely because it has proved to be, in the long run, for their advantage. It is the thing that puts a brake on reckless behavior, which returns the cost of mistakes to the one who makes them, and which expels cheating from the fold.

It hurts to be punished and states that act wrongly naturally try to avoid the punishment. And because under the current system they can pass on their hurt so easily to the rest of us, we turn a blind eye to their behavior. But I cannot help thinking that the result is at best only a short-term economic advantage and that the long-term costs will be all the greater. For what we are seeing, in both Europe and America, is a demoralization of economic life. Debts are no longer regarded as obligations to be met, but as assets to be traded. And the cost of them is being passed to our children, to whom we owe protection and who will rightly despise us for stealing what is theirs.

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