Q. 1. “The finance Company is asked by clients for Machinery, Cars, Equipment, etc on credit. Can it purchase these and other items by cash or credit and then sell them at either 20%, 30% or 40% profit in conformity to payments period and mutual agreement. Is the above form of contracts permissible or not? The above stated percentage of profit are to be paid in cash by the client while the balance is paid over agreed terms.
A. The proposed transaction is called Murabaha and it can be permissible in Shari’ah subject to the following conditions:
1. The machinery or equipment etc should first come into ownership and possession of the Finance Company and should remain in its risk for a certain period, then it should be sold to the client. It will not be permissible to give the client the amount of purchasing price by which he himself purchases the equipment for himself and it is presumed that the Financial Company has sold it to the client.
2. The price of which the commodity will be sold to the client as well as the period of payment should be fixed without any ambiguity.
3. Once the price is fixed it will not be changed due to any delay in the payment by the client.
Q. 2. “Can Motor cars and Machinery be leased to the clients on the following basis: a) Leasing only. b) Leasing with an option to purchase at the price at which the vehicle was initially purchased. b.1) Cars leased will be provided only if a stated percentage of either 20% or 30% (as mutually agreed) of the vehicle, or equipment or machinery value is left as a guarantee and would be returned at the end of the lease period.
A. Leasing is permissible in Shari’ah subject to the condition that the leased assets are owned by the Lessor and he will have to bear the risk relatable to the Corpus of the leased assets. Therefore, if the leased asset is destroyed due to some unavoidable natural calamity, the owner will have to suffer the loss. Any condition to the contrary, as in vogue in the contemporary financial leases, will render the contract of lease void in Shariah. It is not permissible in Shariah to link the Contract of lease with a contract of sale at the end of the leased period. The contract of lease should be independent, and it will be open to both the parties at the end of the lease period to enter into the contract of sale or not to enter into it. If the contract of lease is subject to the condition that the owner shall sell the leased asset at the end of the lease period to the Lessee, the contract shall not be valid according to some jurists, while some other jurists take it as permissible. Therefore, this condition should be avoided as far as possible.
The Lessee can be asked to deposit with the Lessor a certain amount as security for the prompt payment of the periodical rent. This amount shall remain as a deposit with the Lessor and shall be refundable to the Lessee at the end of the lease period.
Q. 3. “In our country, the drivers of the vehicles that meet an accident are immediately sent to jail until a court case is held. This can take six months, one year or more. If the accident causes injury to any person, the driver is sent to prison till the injured person recovers.
Can we, therefore, take insurance cover to prevent ourselves from the above inconveniences since the regulations of our country allow an insured party that is involved in an accident to be prevented from imprisonment.
A. All the methods of insurance in vogue in our times are unfortunately based on interest and qimar, therefore they are not permissible according to Shariah. However, in the situation referred to in this question one can take an insurance cover in order to avoid imprisonment only, but if the Insurance company pays to him some amount, he cannot utilise it except to the extent of the premium actually paid by him to the Insurance company.
Q. 4. (a) Can the finance company take loans from an Insurance company?
(b) Can the company take loans from any other Company or private person owning money?
Amounts forwarded are invested as above in No.2.
(c) These creditors are given commission / part profit of the partnership contract. Is this permissible?
A. The Finance Company can take a loan from any individual or institution, but it should be free of any interest charged thereon. If the commission to be given on a loan is fixed in relation to the principal amount, it will be interest no matter whether it is charged under the name of interest or under the name of commission, but if money is given on the condition that any profit accruing on that amount after investing it in a Commercial enterprise shall be distributed between the Financer and the client, it will be partnership or Musharakah agreement which is permissible in Shariah.
Q. 5. (a) Banks charge a commission for providing a guarantee to clients purchasing goods etc. Can such a commission be added to the costs of the client? (b) Can the Finance Company charge a commission for providing a Guarantee for goods purchased by its client?
A. Any fee charged on a guarantee is not permissible in Shariah. Therefore, any amount paid as a fee for a Guarantee cannot be added to the cost of the commodity in transaction of Murabaha.
Q. 6. The finance company buys cars, Machinery, equipment etc and sells the same to the clients. Sometimes the clients :
a) Return the goods. b) Cannot pay for the goods.
Can the Finance Company retake the goods at a price less than that at which the goods were originally sold to him.
A. In a case where the buyer could not pay the price of the goods sold to him, it is not permissible for the seller to repurchase the same goods from the buyer at a lesser price. However, if the commodity has been subjected to depreciation, the seller can repurchase it at a depreciated price according to the market valuation.
(1) Can Zakat money be given to Non-Muslims i.e. Christians and Hindus.
(2) Can Zakat be given to persons who are AleRasool i.e. Syed Ahle Bait.
(3) A loan is given by housewife to a servant over a period which he is unable to repay. Can it be adjusted to Zakat for current year.
A. (1) Zakat money cannot be given to a Non-Muslim
(2) Zakat cannot be given to a person who is from the progeny of Hashim, the grandfather of the Holy Prophet (S.A.W). Such persons should be supported by other sources like gifts and presents, but Zakat should not be given to them.
(3) Zakatcannot be paid through relieving a debtor from the amount of loan advanced to him. If the housewife wants to adjust her loan to the amount of Zakat, she can give to her servant the amount of zakat in cash, then ask him to pay her loan out of that money, it will be permissible for the housewife to receive it back.
Q. “I am an Indian Muslim Business-man, staying in Saudi Arabia, since 9 years, and a regular reader of albalagh International. may Allah reward you in full, for your service to the Umma. I have few questions in mind, I would be grateful if you answer them.
1. Can we take loan from government, Banks, Financiers, (in India) for the purpose of doing business, or constructing a house, and we have to pay interest. Heard some Muftees in India have permitted the businessmen to take loan. Is this allowed, in case of Dar-ul-Harb? The permission is given on the basis, that if Muslim takes loan and does big business, he will employee a big number of Muslim staff, and many unemployed Muslims can get job, and it is a matter of sawab. If we don’t it do it, the Non-Muslims are doing it, and all big business will be only in the hands of Kafirs. This is practical problem. Could you please comment?
2. If no is the answer to my above question, Can you please let us know the way to do big business in India, without taking loan? I think it’s impossible, and when I studied this carefully I found more than 95% of Muslim Industrialists, Exporters, and big trading groups, do take loan, just to be save from the govt.
As you cannot declare you white money, if you do, you have to pay heavy taxes. So the best way to show the source of income or cash money is loans from Bank, and to pay tax on this money is easy. I am really confused, and this is the main reason, I have never started business in India. Can you please solve this problem? Jazakallah Khair.
(H. R. Salaman, Saudi Arabia)
A. According to the overwhelming majority of the Muslim jurists, there is no difference between darul-Islam and Darul-Harb in the prohibition of Riba. A transaction of Riba is totally prohibited, no matter whether the other party to the transaction is a Muslim or a non-Muslim. Although Imam Abu Hanifah has allowed interest in a non-Muslim Country with certain conditions, yet this view has not been approved by the majority of jurists, including a large number of Hanafi jurists them- selves.
In the early days of the Holy Prophet (S.A.W) many Muslims used to enter into Riba transactions with non-Muslims, but when Riba was prohibited, they stopped this practice totally. The verses of the Holy Quran which prohibited Riba did not differentiate between a Muslim and non-Muslim. Similarly there is no example in the days of the Sahabah (RA) where any one of the Sahabah entered into a Riba transaction with a non-Muslim after the prohibition was enforced.
Therefore, one cannot be advised to take an interest-bearing loan, even in a non-Muslim country. I have heard of some Indian Muslims (in Bombay) who are tying to establish an Islamic bank or a financial institution to be run on the basis of Islamic modes of financing. You should approach them for your financial requirements. They may help you in this respect.