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 By Professor Omar Hasan Kasule Sr.


1.0 BUYING and SELLING, al bayi’u wa al shara’u

A. Goods And Services

B. Contracts

C. Conditions Of A Valid Transaction

D. Types Of Transactions

E. Etiquette Of The Market


2.0 PERSONAL LOANS, quruudh

A. Conditions

B. Collateral

C. Guarantee

D. Transfer Of Debts, Hawala

E. Bankruptcy



A. Investment In Property

B. Investment In Trade

C. Investment In Agriculture

D. Deposits & Trusts, Wadii'at

E. Insurance



A. Wakalah

B. Wage Employment, Ijarah

C. Leasing/Renting, I'arah

D. Endowments, Waqf

E. Competitions, Sibaaq

F. Gifts, Hibaat



A. Stock Exchange

B. Commodity Exchange

C. Currency Trading

D. Public Debt

E. Free Trade



1.0 BUYING and SELLING, al bayi’u wa al shara’u

All transactions are permitted unless there is specific text on prohibition. Individual ownership of property is a basic human right in Islam. Intoxicants, Idols, humans, and stolen property cannot be sold or bought. Knowledge cannot be sold but the writer and printer should get benefit from their labor and investment.. Halaal professional services performed in return for a fee are allowed. It is prohibited to seek, pay for, or offer haram services. Rights are a form of intangible property that can be sold. Scales and measures are needed to make sure that the amounts of goods exchanged in a transaction are specified. The Law does not interfere in the operations of the free market unless there is exploitation (monopoly and hoarding) or immoral effects are feared. Business transactions should be written and witnessed to avoid future disputes. No condition repugnant to the Law is permitted in the contract. Advance payment for goods, salam; ,purchase on credit, nasiiat; auction, muzayadat; sale of an absent article, ghararat, and selling on commission are permitted. The Law prohibits transactions that may involve uncertainties and the potential deception and therefore disputes. The strongest prohibition is transactions involving riba. The Law requires Full disclosure by both the buyer and the seller and any form of deception is forbidden. Brokerage and middlemen are allowed because they are a necessity in trade. Middlemen who make quick profits without effort are discouraged. Custom or precedence, ‘urf, is respected and is legally binding.


2.0 PERSONAL LOANS, quruudh

Debts must be written and witnessed. If it is not possible to write, a collateral can be taken. The property of the debtor can be seized to settle outstanding claims. A guarantor of a debtor is liable to pay in case of default. Payment of a debt can be transferred. The creditor can also transfer the right to collect a debt. A debtor becomes bankrupt when his assets are less than the liabilities. Creditors can take back property from a bankrupt debtor. They take whatever they find of the debtor's property .



Partnership, sharikat, is in general allowed in owning investment property jointly. Business partnerships, musharakat, can be pooling of capital, pooling of human resources, pooling of goodwill or contacts, or any combination of the above. Murabahat is pooling of capital that is invested. The partners agree to a fixed proportion of profits or losses. It is illegal to fix a certain amount as the profit due to a partner because that would constitute riba. Mudharabat involves pooling of capital and human resources and is co-operation between the owner of capital, the worker and the manager. There is a pre-fixed proportion of sharing losses and profits. In sharecropping, muzara’at, the landowner and the farmer agree to share the produce according to agreed formula.



The Law regulates deposits and trusts. The trustee does not pay if the trust is destroyed accidentally. He pays for depreciation due to his use of the property. The concept of deposits, wadii'at, has been employed in modern Islamic banking schemes. Islamically-sanctioned insurance is a joint investment. Funds contributed as premiums are invested in mudharabat ventures. Each member has two accounts: a personal account and an account in which are placed funds used for pay-outs to the families of those who die early.. Appointing an attorney or an agent is permitted. The agent can take measures to prevent property under his care from getting spoiled or getting lost. The agent can pay debts on behalf of the owner. Illegal transactions by the agent are not binding on the owner. Wage employment, ijarah, is employment in return for wages. Leasing/renting, i'arah, is when you lend someone an animal to benefit from the milk and he returns the animal after that. Waqf is continuous charity. The endowment consists normally of fixed property whose income is used for a fixed purpose. The income is used and the endowed property is never sold. gifts, hibaat, express mutual love. A gift can be witnessed especially if future disputes are anticipated. Gifts to officials are discouraged because they may encourage bribery and corruption.



The consensus of scholars is that stock transactions are permitted unless the company involved is trading in forbidden goods or is undertaking prohibited activities. Currency exchange is allowed if no delay is involved. Free trade in halaal goods and services is encouraged because of its efficiency at the international level may not serve national or ummatic interests in some cases and due care must be taken.

Professor Omar Hasan Kasule Sr. September 2001