Zakat

Zakt (Arabic: "that which purifies"), or alms-giving is the practice of charitable giving by
Muslims based on accumulated wealth, and is obligatory for all who are able to do so. It is
considered to be a personal responsibility for Muslims to ease economic hardship for others and
eliminate inequality. The practice is one of the Five Pillars of Islam. Islam has kept the share of
poor and needy in the wealth of Rich. This will be paid as a duty and amanat of poor but not as a
favor to them. It was ordered in the 2
nd
year of Hijra.
Zakat is one of the five pillars of Islam.
It has been mentioned, along with daily Prayers (Salaat / Namaz), over seventy times in the
Quran.
Allahs word commanding ".....and establish regular Salaat and GIVE regular Zakat....." are
referred to in many parts of the Quran.
Allah says in the Quran: "And there are those who hoard gold and silver and do not spend it in
the way of Allah, announce to them a most grievous penalty (when) on the Day of Judgment heat
will be produced out of that wealth in the fire of Hell. Then with it they will be branded on their
forehead and their flanks and backs. (It will be said to them) This is the treasure which you
hoarded for yourselves, taste then the treasure that you have been hoarding." (Al-Quran 9:34-35)
TYPES OF WEALTH ON WHICH ZAKAT IS IMPOSED
Islam also orders to pay zakat not only on the cash savings but also on the commercial goods. It
includes all types of commercial goods whether moveable or Immovable (e-g):
Gold and silver in any form
Cash, bank notes, stocks, bonds etc.
Merchandise for business, equal to the value of Nisaab
Live stock
On income derived from rental business.

Nisab of commercial goods

The amount of wealth which makes one liable for Zakat is called Nisaab.
Gold 87.48 Gram 7.50Tolas 1350Grains 2.8125Troy Oz
Silver 612.36Gram 52.50Tolas 9450Grains and 19.6875 Troy Oz
Nisaab of cash, stock or bonds, other cash assets is the equivalent amount of Gold or Silver.
Nisaab is calculated by adding up the cash value of all the assets such as gold, silver, currency
etc. and if it is equal TO or in excess of the minimum Nisaab as specified in the above table, the
Zakat is due at the rate of 2.5%
VIRTUES OF ZAKAT: Allah says in the Quran: "The parable of those who spend their
wealth in the way of Allah is that of a grain of corn. It grows seven ears and each ear has
hundred grains. Allah increases manifold to whom He pleases." (Quran 2:261)
The Messenger of Allah (s.a.w.s) said
Islam Began as something Strange and will Revert to being Strange as it Began, so give
Glad Tidings to the Strangers.

References
Samara bin Jundab rt narrates, that Prophet peace be upon him use to order us that we must take
the zakat out from our commercial goods. (Dar ul Qutni, V:2, P: 376)
The prophet (pbuh) said: "Any owner of gold and silver who does not deliver from them their
right, on the Day of Quiyamah (Day of Judgment), (the gold and silver) will be shaped as foils of
fire. Then it will be heated in the fire of Hell; (and) then with it he will be ironed on his side, his
forehead, and his back" (narrated by Muslim).

The alms are only for the poor and the needy, and those who collect them, and those whose
hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah,
and (for) the wayfarers; a duty imposed by Allah. Allah is knower, Wise." (The Holy Qur'an 9:60).

Allah states in Surah at-Taubah verses 34-35: "34:O ye who believe! There are indeed many
among the priests and anchorites, who in Falsehood devour the substance of men and hinder
(them) from the way of Allah. And there are those who buy gold and silver and spend it not in
the way of Allah. announce unto them a most grievous penalty- 35:On the Day when heat will be
produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their
flanks, and their backs, their flanks, and their backs.- "This is the (treasure) which you buried for
yourselves: taste you, then, the (treasures) you buried!" (The Holy Qur'an 9:34-35).

Important Masail of Zakat:
Zakat is due on commercial goods only.
If the goods are purchased for personal use and then planned to sell them out It will be counted
as commercial goods then but the calculation time will start from the day, it will be practiced.
No zakat is due on machinery, building, houses, equipments, furniture etc
Zakat will be due on the rent received after a whole lunar calendar is passed.
Zakat will not be due on the machinery of factories or mills but on the manufactured goods as
well as on raw material.
Zakat will be due on shares after the whole lunar calendar is passed.
If someone has cash, gold, silver and commercial goods all together He will make the appraisal
of all of them and will pay the zakat at the end of the year. This is the opinion of Imam Abu
Hanifa rt, Imam Shafi rt, Imam Ahmed bin Hanbal rt and Imam AuzaiI rt.

Islamic Trade and Finance

International trade
The international Islamic trade finance corporation (ITFC) is the advancing trade to improve the
economic situation and livelihoods of people across the Islamic world. As an Autonomous entity
within the Islamic development bank group, the ITFC was formed to consolidate the trade
finance business that was formerly undertaken by various windows within the IDB group. The
consolidation of the banks trade finance activities under a single umbrella increases the
efficiency of service delivery by enabling rapid response to customer need in a market-driven
business environment.
Muslims are required to behave Islamically in their business dealings because Allah Himself is
witness to their transactions:

"O you who believe! Eat not up your property among yourselves in vanities: but let there be
amongst you traffic and trade by mutual good-will: Nor kill (or destroy) yourselves: for verily
ALLAH hath been to you Most Merciful" [4:29]


"In whatever business you may be, and whatever portion you may be reciting from the
Qur'an and whatever deed you may be doing We are Witnesses thereof when you are
deeply engrossed therein. [Al Qur'an 10:61]
Concept of free Trade
Free trade is a policy by which governments do not discriminate against imports or exports. Free
trade is exemplified by the European Union / European which have established open
markets with very few restrictions to trade. However, most governments still impose
some protectionist policies that are intended to support local employment, such as
applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to
limit exports of natural resources. Other barriers that may hinder trade include import quotas,
taxes, and non-tariff barriers, such as regulatory legislation.
Protected Trade
The imposition of duties or quotas on imports in order to protect domestic industry against
foreign competition; "he made trade protection a plank in the party platform"
More focus on Local products to protect economy & Domestic Trade.

Islamic trade system
Islam is in favor of free trade because;
The whole world belongs to Almighty Allah
The whole world belongs to Muslim
All Muslims are equal & one
The economy belongs to Almighty Allah
The Economy is controlled by Almighty Allah
There is no country & Boundary in the world
Provision will be provided by Almighty Allah (Individuals/nations)
All Muslims are the brothers of each other
Islam orders to support cooperate & serve each other
Whether Muslims or Non Muslims
The Prophet (peace be upon him) said, "Truthfulness leads to righteousness, and righteousness
leads to Paradise. A man continues to tell the truth until he becomes a truthful person. Falsehood
leads to al fujuwr (i.e. wickedness, evil-doing), and al fujuwr (wickedness) leads to the (Hell)
Fire, and a man may continue to tell lies till he is written before Allah, a liar." [Hadith No. 8.116]
Uniform Trade by Muslims
Muslims are one
No Geographical boundaries
Concept of Free Trade between Muslims
Support Each other like one family



Purpose:
Islam is a Global Religion and emphasis on equality in all aspects as well as in Trade with other
nations. Thats why; it has not adopted any law which creates anger, hatred and jealousy between
nations and countries. As a result of it, one nation oppresses other or one country takes the control or
gets the monopoly in the international market. Its teaching are based on the Unity, Love, cooperation
and equality between nations and countries. This made This Trade as a Universal source of cooperation
for everyone. So the whole humanity becomes one United Family.
Holi Quran
And verily this religion (of Islamic Monotheism) is one religion, and I am your Lord, so fear
(keep your duty to) Me. (Surat ul Mominoon, Chp: 18, V: 52)
The believers are nothing else than brothers (in Islam). So make reconciliation between your
brothers, and fear Allah, that you may receive mercy (Surat ul Hujuraat, Chp: 49, V: 10)
All Muslims are like one body and everything belongs to Allah, thats why Islam wants Muslims
to support each other in Trade. All the Products, sources & factors of Production must move
freely in the world. So the economical needs of all can be fulfilled easily.
Muslim must support others through their economical strong resources. Like Oil, Labor,
Technology, Military equipments etc.
Trade with non Muslim
Islam Allows free Trade even with Non Muslims
Islamic Laws are revealed even for the benefit of Non Muslims.
All human beings are equal in their economical needs
All Muslims are ordered to support others even non Muslims at the time of their need



O mankind, fear youre Lord, who created you from one soul and created from it its mate and
dispersed from both of them many men and women. And fear Allah, through whom you ask one
another, and the wombs. Indeed Allah is ever, over you, an Observer.

Purpose of trade in Islam
To Show Sympathy, care & solidarity
Fulfill the needs of each other
Economical stability
Cooperation with each other
Service to Humanity

The purpose of trading is to make money. The trade is planned, entered, and exited with the goal
of increasing the size of one's trading account. What other purpose would there be?

"Something set up as an object or ends to be attained: intention b: resolution,
determination"


O you who have believed, fulfill [all] contracts. Lawful for you are the animals of grazing
livestock except for that which is recited to you [in this Qur'an] - hunting not being permitted
while you are in the state of ihram. Indeed, Allah ordains what He intends.

The whole Humanity is the creation (Family) of Almighty. The most dearer to Allah is one,
who is best in treating his creation. (Miskhqaat, Hadith: 52)
Trade Policy with Non Muslim Countries
Countries with good relations
Countries with not good relations

Holy Quran



Allah does not forbid you from those who do not fight you because of religion and do not expel
you from your homes - from being righteous toward them and acting justly toward them. Indeed,
Allah loves those who act justly.




Allah only forbids you from those who fight you because of religion and expel you from your
homes and aid in your expulsion - [forbids] that you make allies of them. And whoever makes
allies of them, then it is those who are the wrongdoers. (Surat ul Mumtahinnah, V: 8-9)
In those verses of Holy Quran, it is clearly mentioned that the Islamic Trade Laws forbid
having trade relations with those nations, who are the enemies and in the state of war with
Muslims. With the rest, it is permitted. And they must get benefit from the products of Muslims.
Islam also emphasis to do favors to others even though they are not good/supportive with you.
Imam Mohammad rt quoted an incident of Prophet peace be upon him.
Once Makkans faced drought at the time of Prophet Peace be upon him. He sent 500
dirhams to Abu Sufiyaan bin Harb and Safwaan bin Umaiyyah (Leaders of Arab) through
a messenger. And they distribute it among the needy of Makkah.
Samama bin Asaal rt was the leader of Yamama. After embracing Islam, he was passing by
Makkah after a visit to Madina. Kuffar of Makkah cursed him and criticized his action. He
angrily said, you will not be able to import the wheat & grain of Yamama until I am ordered by
my Prophet peace be upon him. As a result, People of Makkah started facing the signs of
drought. When Prophet peace be upon him was informed, He ordered Samama rt to allow
Makkaans to import wheat. (Bukhari, Chp: wafd bani Hanifa)
Taxes in Trade
Taxes not allowed in Islam.
In International Trade, mostly rich nations/countries take advantage of their economy by
imposing taxes and duties (custom) on poor. Which is not Fair and an exploitation. Islam has
removed barricades from very beginning by announcing:
(All Human Beings are the Family of Almighty Allah)
If the other countries impose taxes and duties on the products of Muslims, then Muslims are also
allowed to impose restrictions on them on the basis of equality. The Directive (Instructions) of
Umer rt to the Governor of Basra Abu Musa Ashari rt is a very good example in this regard. He
ordered.
Instructions:
Take only that much taxes from Non Muslims, which they normally take from Muslim
merchants.
This order was given to impose a Just/Fair Trading Law on International basis.
It will not only protect the Muslim merchants but also will provide another source of
income to the Muslim State.
It will also force Non Muslim States to reduce their Taxes level especially while dealing
with Muslims.
Through Islamic Trade System, we can create Economic Justice instead of Economic
Retaliation on the International Level.
If a Non Muslim country does not charge any taxes or duties from Muslims, Muslim
country is also bound not to charge any taxes from them either.

Code of Ethics of Islamic Trade:
Islamic countries will be bound to do trade on the basis of following codes.
No Haram products can be imported from Non Muslim countries (wine, alcohol, immoral
literature, idols etc). Prophet peace be upon him forbade the business of Haram products.
Certainly, Allah swt and His Apostle has forbidden the trade of wine, dead animals, pig and idols
(statues). (Agreed upon, kitab-ul-Buyu)
The products which effects & weakens the Muslim States economy or becomes the source of
problem/jeopardy for Muslims in the future are not allowed to export. (weapons, military
equipments raw material and other technology)
All trade agreements (which are not objectionable) will must be fulfilled & completed by
Muslim State / Govt.

O you who have believed, fulfill [all] contracts. Lawful for you are the animals of grazing
livestock except for that which is recited to you [in this Qur'an] - hunting not being permitted
while you are in the state of ihram. Indeed, Allah ordains what He intends.
Surat ul-Maida, Chp: 5, V:1






And do not approach the property of an orphan, except in the way that is best, until he reaches
maturity. And fulfill [every] commitment. Indeed, the commitment is ever [that about which one
will be] questioned. Surat-ul-I sraa, Chp: 17, V: 34

Sharing Benefits:
The benefits provided by Muslim state to the Non Muslim traders will also be taken from the
Non Muslim states for Muslim traders.
Some scholars are in the opinion that the custom duties should not be imposed on any import or
export business.
Any type of Toll Taxes and Excise Duties are not allowed in Islam.
Holy Prophet peace be upon him said,
Toll Tax receiver will not enter in the Heaven.
Umer bin Abdul Aziz rt once wrote to one of his Governor:
Stop taking Toll Taxes from the public because this is not a tax but a
Zulm on the public (Abu Ubaid Qasim bin Salam rt, Kitaab-ul-Amwaal).
Marketing
Definition of marketing
Marketing is the process of communicating the value of a product or service to customers, for the
purpose of selling that product or service.
Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society
at large.
Publicity & Advertisement:
Promotion & Marketing of Products is allowed within the boundaries of Shariah
According to QURAN
And the earth We have spread out (like a carpet); set thereon mountains firm and immovable;
and produced therein all kinds of things in due balance.
And We have provided therein means of subsistence,- for you and for those for whose
sustenance you are not responsible.
And there is not a thing but its (sources and) treasures (inexhaustible) are with us; but We
only send down thereof in due and ascertainable measures (Surah Al-Hijr; 19, 20, 21).
Todays Advertisement

Involvement of Women
Exposure of bodies
Putting Lust in the minds
Lies about the Products (claim of purity & quality)
Fake Praises

Publicity / Advertisement Effects on Economy & Social Life:
Attraction toward lavishness
Attraction toward greediness
Increases the graph of the crimes
Attraction toward luxurious life style even though beyond the earning capacity, which
ultimately leads toward corruption
Artificial increase in the demand of products (disturbance in the natural law of supply &
demand), which will lead toward the demand of increase of supply. Ultimately it lead
toward a materialistic and selfish life.
Effects on the inflation and deflation in the country
Breaks the Basic Islamic philosophy of Simplicity
Most of the crimes (Robbery, stealing etc) are made by rich people
Effects the Moral Values & Culture of the society
Produce an Immoral, unequal, unjust society
Divert the attention from the main goals, objectives & cause (service to Islam)

Islamic Philosophy about Publicity:
It should not be use to benefit the industrialists only. But for the benefits of customers /
individuals as well
Teachings of Islam:


O children of Adam, take your adornment at every masjid, and eat and drink, but be not
excessive. Indeed, He likes not those who commit excess.




And give the relative his right, and [also] the poor and the traveler, and do not spend wastefully.




Indeed, the wasteful are brothers of the devils, and ever has Satan been to his Lord ungrateful.
(Surat ul Asraa, Verse: 26-27, Chp: 17).

And those who, when they spend, are neither extravagant nor niggardly, but hold a medium
(way) between those (extremes).(Surat ul Furqaan, Verse: 67, Chp: 19)
Hardworking & Simplicity
Umer rt, once felt that the new generation of Arab becoming use to of comfort. He advice them
to work in the sunshine and stay strong by saying: Sun is the Hammam (place of bath) for Arabs.

On another occasion, he said to the Arab youngsters:
Be strong and hardworking, these bounties will never stay permanently.
Once Prophet peace be upon him said to Muaz bin Jabal rt, Stay away from luxurious
living style. Certainly, the (true) slaves of Allah never become use to of luxurious life.
(Ahmad, Chp: Fazl ul fuqaraa, Hadith: 6)

Audit System
Definition of audit
An official inspection of an organization's accounts, typically by an independent body
"Audits can't be expected to detect every fraud".

Audit System:
Islam wants the laws of Business in Islam to be used for the benefit, welfare of the public and as
a source of cooperation among human beings. Islam has given this right to the State to control,
watch and supervise the Economic and Business transactions of the country and to impose the
audit system for the benefit & security of public.
Ibn Akhuwaah (a famous Islamic Scholar) has written very comprehensive details about the
Audit system in Islam. Where he mentioned different aspects with complete guideline for all
kinds of business professionals.
He writes:
Auditor is responsible to supervise all the activities of wheat from crushing to flour
making. No dust, sand or pebbles should be mixed up in grinding wheat making flour for
the public. No artificial color should be added in the flour.
Flour should not be made with the feet, knees, elbows. It is considered immoral &
disrespectful to provision. Also sometimes the swet of a person is added into it. Which is
highly disrespectful and Makrooh in Islam. Bread should be in a standardized shape, size
and weight for the public.
Upon traveling, Transport vehicle should not be loaded more than its loading capacity.
There should be a separate class/space for the women folk fully covered and hidden.
An Auditor must be appointed for each and every product available in the market. The
Auditor has the right to approve or disapprove, pass or fail the quality of goods.
(ibn Akhuwaat, Mohammad bin Mohammad bin Ahmed Al Qarshi, Maalim ul Qurbat fi Ahkaam ul
Hasabah: Cambridge Press, London, 1938, P: 89-94, & P: 227-229)


According to the scholars of Islam
Auditor is not only responsible for the quality control in the market but also to test the
Islamic Business knowledge of merchants. Few examples are taken from the famous
book Al Mudkhal of Abu Abdullah bin Al Haaj by Sheikh Abdul Haiy Al Kattani.
Umer Bin Khattab rt use to beat that person with his Durra, who use to sell his products
in the market but were not aware of the Islamic teachings for Business. He use to say,
The person, who is not aware of the Islamic Business Laws especially the masail of Riba
is not allowed to sit in our market.
He also mentioned that its the duty of an Auditor to walk / patrol in the market and
question the shopkeepers about the basic principles and Masail of buying and selling
including the Riba, that from where this Riba can enter into the business transactions and
how can we get rid of it. If the shop keeper would answer him correctly, then he would be
allowed to continue his business otherwise he must be stopped until he is trained & aware
of basic teachings of business.
Imam Malik rt use to test the shopkeepers by asking different questions related to the
masail of buying and selling. If some one use to fail the answers, he use to stop him from
selling saying, Go and learn the Ahkaam of buying and selling first and then stay/sit in
the market for your products.
Imam Malik rt would not accept merchants as a witness for any deal (agreement) until he
was aware of buying and selling rules.
In big sized businesses, when merchants use to travel abroad for their businesses, they
use to request a Faqeeh (Mufti) to accompany them to help in resolving Masail of
Business.
All scholars of Islam agree that no seller is allowed to sit/stay in the market for business
until he is fully aware of all the attiquates / teachings of Business Market.

Purpose:
To protect the general public from the harms evils and selfishness of merchants E-g: Prophet
Peace be upon him use to go to market to supervise the activities of merchants.

Hadith:
It is narrated by Abu Hurairah rt that Prophet peace be upon him passed by a hump of wheat. He
put his hand in it and his fingers become wet. He asked the seller, what is this? He replied, O
Prophet of Allah, it became wet because of the _______ Aous of sky. Prophet peace be upon him
said, Why didnt you put that on the top of that hump then. So the people could see it and will be
saved from this cheating. Remember, those who mix up is not among us.
Prophet peace be upon him has forbade the Talq-ul-Jalb and Bai ul Hazir Li Baad. It is also
considered one of the sources of this Audit system. Because clever merchants take economic
advantage of innocent sellers It is also quoted in some riwayaat that prophet peace be upon him
had appointed a Sahabi rt to supervise the market activities.
(ref: Risala Liwa ul I slam, Cairo, J une 1953).



Pricing
Definition of pricing
decide the amount required as payment for (something offered for sale).
"the watches are priced at 55"
Hadith:
once Sahaba rt asked Prophet bbuh to decide/set the prices of the products. He refused to do so.
It is narrated by Anas rt that once at the time of Prophet pbuh, prices rise high. Then the sahaba rt
requested Prophet pbuh, O Prophet of Allah, it will be good, if you decide the prices for us. He
replied, certainly Allah is the one who controls, sustains and creates ease. I wish that I meet
Allah in a condition where no one claim any offence on me which I have done on him either that
offence is related to blood or goods (Maal). (Tirmidhi, Ibn Maaja)
It is narrated by Abu Hurairah rt that a man came to Prophet pbuh and said, O Prophet of Allah,
Please decide the market prices for us. He replied, I can make only dua for you. Then another
person came and made the same request, He then replied, only Allah is the controller of prices
and I want to meet Allah in a condition where no offence stay on my shoulder. (Tabrani)
Once the prices went high at the time of Prophet pbuh. People asked, O Prophet of Allah, prices
went high, you decide the market rates for us. So we can stick on it. He replied, certainly
increasing or decreasing in the prices is by Allah and it is not suitable for us to interfere in the
matters and decisions of Allah. (Abu Dawood, Kitaab-ul-Buyu)

These Ahadith of Prophet pbuh clearly shows:
State has no right to set prices
It is considered a Sinful Act
It is considered a Major Offense

Price setting (Taseer) is prohibited according to all Imams/scholars.
According to Hanabala, famous scholars like Shamsuddin abul firaaj Abdul Rehman bin Abu
Bakr writes:
The ruler has no right to decide the prices for the products of basic needs. Leave It on the public,
however they are willing to sell it.

Imam Shafi rt has the same opinion.
According to the scholars of Ahnaaf, their opinion is mentioned by Marghenai rt in his book Al
Hidaya with those wording:

It is not appropriate for the ruler to bound the public on controlled prices because Prophet pbuh
said, do not decide prices because Allah decides it, He creates ease and difficulties and He
sustains. And also that, information of price is the right of the seller therefore, only he can decide
it and state should not interfere in their rights. But if for the purpose of public benefit, it is
required, then is acceptable. If the merchants start charging higher price of basic needs items and
the judge cannot defend the benefits of public but by fixing the state controlled prices of those
items then with the opinions of other skilled and experts, it is allowed.
(Al Hidaya, Baab Al Karahiya)

Masail of Profit

Definition of profit
a financial gain, especially the difference between the amount earned and the amount spent in
buying, operating, or producing something.
"record pre-tax profits"

Ghaban-e-Fahish
It means invalid profit. Islam does not restrict the limit of profit but does not accept the Ghaban-
e-Fahish either.
Normally the seller takes the advantage of buyer because of his need for the Mabeea. Islam has
forbidden of taking this kind advantage of the need of the buyer.

Q: Can a limit be assigned for a Ghaban-e-Fahish?
Q: What is the order about the Bai of a Ghaban-e-Fahish.
Ans: Scholars have different opinion in assigning the limit for Ghaban-e-Fahish.
According to the scholars of Ahnaaf, Ghaban-e-Fahish is such price which is beyond or above
the expected market price of the public.
E-g: If a product is purchased on Rs 100. and the similar product through known individuals,
offered to the buyer of a less price than Rs. 100 like 60 or 80 or 70 etc. Nobody made a guess of
Rs 100. Then this already charged price Rs. 100 for the same product will be considered Ghaban-
e-Fahish. This deal can be cancelled and the product can be returned.



Shafi school of thought has the same opinion.
According to Maliki school of thought, Ghaban-e-Fahish will be considered when the product
is sold on at least 1/3
rd
less or high price than the total of market price. (it means discounted price
or profit margin should not exceed than the 1/3
rd
of the total price of the market).
Maliki school of thought put two conditions as well:
No consumption should be made in the Mabeea
Deal (Sale / Purchase must be less than one year old
(Kitab-ul-Fiqh aala Mazahib ul Arbaa, vol 2, Kitab-ul-Buyu)

Summary of Ghaban-e-Fahish:
Profit must be limited within the normal buying and affordable capacity of public.
According to Maliki scholars, it should not be higher than the 1/3
rd
of the total
market price of the product.
Govt. can impose restrictions on seller for charging higher profit and can set a
punishment rules for them




Loan / Credit
Definition of laon
A thing that is borrowed especially a sum of money that is expected to be paid back with interest.
The act of giving money, property or other material goods to a another party in exchange for
future repayment of the principal amount along with interest or other finance charges. A loan
may be for a specific, one-time amount or can be available as open-ended credit up to a specified
ceiling amount.
It is totally based on RIBA it is HARAM in Islam
In Islamic point of view
Any form of financing made according to Islamic law, which forbids the payment or receipt
of interest. An Islamic loan may be an interest-free loan, but often it is a more
complex transaction. For example, a bank could buy an asset for cash and then re-sell it to the
"borrower" for a profit such that the profit is the same as the bank would have made had it
extended a regular loan. Other types may involve the bank becoming a partner with the
"borrower" so that both co-own the asset or business that the loan finances, and the borrower
gradually buys the bank's share of ownership with a series of payments. Strictly speaking, most
Islamic loans are partnerships or joint ventures, but they are called loans because they
accomplish much the same thing as conventional loans. See also: Islamic finance, Murabaha,
Mudharaba, Musharika.
Business is always in need of give and take of loan or credit dealings. According to Islam, there
is no room for charging interest on Loans. Because poor & week will always be in need of some
favors from each other and it is not allowed to take the advantage of some ones need.
Islam has set few instructions for both Lender & Borrower:
Teachings for Lenders
Teachings for Borrowers

Definition of Lender
An organization or person that lends money
To give or allow the use of temporarily on the condition that the same or its equivalent
will be returned.
To provide (money) temporarily on condition that the amount borrowed be returned,
usually with an interest fee.
To contribute or impart:
To accommodate or offer (itself) to; be suitable for:
Teachings/Instructions for Lenders:
Islam emphasis when you lend to your brother and if he is in crisis, you should give him more
time to pay your debts And if he is not capable to pay you back neither any hope in the future
then you are demanded to forgive him (and expect reward from Almighty Allah).
In other verses honoring agreements is given as a commandment:
"O Believers: Honor your contracts" (5:1)
"And fulfill every commitment. Surely every commitment will be asked about (on the day
of judgment)." (17:34)



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.
Al Baqarah, Chp:2: V: 280

Hadith:
If someone among you has a right (loan) on other, and he provide him more time, there is
sadaqah reward for him on each day. (By Imran bin Hussain rt, Musnad-e-Ahmad)
The one who wants that Allah save him from the hardships of the day of Judgment, he should
give more time to his borrower or forgive his rights (loan). (Muslim,KitaabBuyu)

It is narrated by Abi Yaseer rt that I heard Prophet pbuh saying, whosoever give flexibility (more
time) to a person in crisis (about his loan) or forgive his debts, Allah will provide him His own
shade on the day of Judgment. Muslim, Kitab-ul-Buyu
It is also stated in many Ahadith that Prophet pbuh demanded the lender to talk to the borrowers
and others while dealing for loan in a very soft and polite manner.
May Allah show his mercy on that person, he whenever sells, buys or demands for his loan, deals
in a polite and kind/nice manners (Bukhari,Kitaab-ul-Buyu).
In QURAN
The reader is advised to study section thirty-nine of Al-Baqarah, before reading on. Three
fundamental statements are made in section 39:
1. Loans should be evidenced in writing and a maturity period fixed for the return of the
loan.
2. The loan agreement should be witnessed by two persons.
3. If a scribe is not available to put the loan agreement into writing, as for instance in a
journey, a collateral should be taken for the return of the loan.

Instructions / Teachings for Borrowers:
Definition of borrowers
Someone who receives something on the promise to return it or its equivalent
To obtain or receive (something) on loan with the promise or understanding of returning
it or its equivalent
To adopt or use as one's own
In subtraction to take a unit from the next larger denomination in the minuend so as to
make a number larger than the number to be subtracted
To adopt (a word) from one language to use in another
Islam also forces borrower to pay his loan/debts full and on time unless there is any genuine
excuse. Otherwise he will be responsible in the sight of Allah.
Borrowing and Lending is actually an agreement between the parties and the conditions must be
fulfilled by both sides. If the Lender demands for his loan ahead of time or borrowers doesnt
pay on time, then according to the Holy Quran, they are breaking the commandment of
Almighty Allah
In quran
"(Believers are those) who are faithful to their trusts and to their commitments." (23:8) and
"Those who fulfill their commitments when they make them" (2:177)
If the borrower does not pay his debts without any reason / excuse, It is considered an Offense
(Zulm) by Prophet pbuh.
Prophet pbuh did not use to lead the funeral prayer of a person, who intentionally ignore to pay
his debts.

And they say: "Tales of the ancients, which he has caused to be written: and they are dictated
before him morning and evening."
"We know indeed that they say "It is a man that teaches him." The tongue of him they wickedly
point to is notable foreign while this is Arabic pure and clear. Those who believe not in the
Signs of Allah, Allah will not guide them and theirs will be a grievous Penalty." (Yusef Ali's
translation)
The leftover debt of a rich is Zulm. (Agreed Upon)


Hadith
It is narrated by Salma bin Akwaa rt, once we were sitting with Prophet pbuh. A funeral was
brought. He was asked to lead the prayer. Prophet pbuh asked is there any debt due on him. It
was said, No. then he lead the prayer. Then another funeral was brought. He asked, is there any
debt due on him. It was replied. Yes. He asked does he leave anything. It was replied, yes, three
Dinaars. Then the debt is paid through these Dinaars and he led the prayer. Then a third funeral
is brought. He asked, is there any debt due on him. It was replied, yes. He asked. Did he leave
anything? Sahaba rt said, No. He then said Lead and offers the prayer of your brother. Abu
Qatadah rt said,
O Prophet of Allah, lead the prayer, I will pay his debts. (Bukhari)
After concoring Makkah, Prophet pbuh use to pay the debts of poor by himself and then use to
lead the funeral prayers. In this regard, he had announced:
When Allah opened the doors of victories for him, he announced: I am dearer to Muslims more
than their souls. Whosoever dies among them, and leave the debts behind. I am responsible /
liable for it. And those who leaves behind any wealth, it belongs to his inheritors. (Bukhari)
On another accasion, he said, whosoever dies and debt is due on him and he leaves nothing
behind. I am liable/ responsible for his debts/dues. (Bukhari)
These Ahadith proves that if the debtor dies without paying his dues and he leave nothing behind
then it becomes the duty of the Muslim State to pay his dues. It will satisfy the soul of that poor
Muslim as well as the lender will get his right.
It is narrated by Abu Hurairah rt, that one person demanded Prophet pbuh for his loan and he
talked harshly with him. The companions of Prophet pbuh tried to teach him some manners.
Prophet pbuh said, leave him alone. He has the right to talk. Buy a camel for him. Companions rt
said, O Prophet of Allah, we are capable to get a better camel in age than this. He replied. Ok.
Get a better one and give it to him. The best among you is he, who pays back good
(Muslim, Kitaab-ul-Buyu)
Conclusion:
This Islamic Financial System provides:
Benefits to Poor
Service & Flexibility to Rich
Loaning Facility to every Individual
Financial Security to the Lenders
Security Guarantee by State
Smooth running of the Financial & Economic System
Prophet pbuh called the debt of a person an unforgivable crime as it is mentioned in many
Ahadith. He even said about the martyrs, that they will be questioned too.
All sins of a Martyr will be forgiven but debt.(Muslim, Kitaab-ul-Buyu)
It is narrated by Shareed rt that Prophet pbuh said, the excuses of the one, who is capable of
paying his dues make his honor and punishment permissible. (Abu Dawood & NasaiI, Kitaab-ul-Buyu)
According to Ibn Mubarak
Muslim Qazi / Judge is allowed/permitted to sell out the property of the debtor in the market to
get his loans paid.
Islam emphasis borrower/debtor to pay not only on time but pay more than their actual dues
It should be on unconditional basis neither without any expectation of benefit otherwise it will
turn into Riba.
It is narrated by Abu Rafee rt, that Prophet pbuh took a young camel from a person as a loan.
Then he received few camels of Sadaqah. Abu Rafee rt says, Prophet pbuh ordered me that I
should give one young camel to that person. I said, I see all these camels better & with four teeth
than this one (Young). He replied, OK, give that one to him. Best among human beings is one,
who pays back his dues in good/better shape. Mishkaat
It is narrated by Jabir rt that Prophet pbuh owed me some loan. He paid it back in full as well as
some more. (Mishkaat)
Rahan (Security):
Islam allows the lender to demand for a Rahan (security) from the borrower before giving any
loan.
Terms & Conditions
Major conditions of Rahan are as follows:
The Profit & Loss of the Marhona (Pledged) thing is the responsibility of the owner. Temporary
benefits will fall in the favors of Murtahin (Pledger) as a fee for his services to that pledged item.
Long term or permanent benefits will be the right of the owner.
E-g: Mr. Umer pledge his cow to Mr. Ali as a security against his loan from Mr Ali. Now this
cow will be considered as an Amanat (Trust). Now if the cow, dies or stolen. It is the loss of Mr.
Umer. if she begets a baby------------, it also will belongs to Mr. Umer. But Mr. Ali can use the
milk of that cow as a fee for his services of keeping and feeding the cow.
It is narrated by Abu Hurairah rt that Prophet pbuh said, on riding animals, it is allowed to ride as
a fee for spending on it when it is pledged as a security. Just like that, the milk of a milking
animal can be use as a fee of spending on it, when it is kept as a security. The one who rides who
drinks the milk They are responsible for their expenses (food, service etc) (Bukhari)
It is narrated by Saeed bin Musayib ra that Prophet pbuh said, Pledged/Secured thing cannot stop
its owner. For him, there are benefits and there are losses as well.
(Mishkat, by I mam Shafi ra)
Taking benefits from those pledged animals are allowed whether used for ridings or milking (as
a fee of services provided for them). Taking benefits from other pledged items like house, shop,
jewellery are not allowed. If they are rented out (with the permission of owner), then this rent
will be given to the owner
Same Law applies to the agricultural land. If the Murtahin cultivates it, he will get his share
according to the share of the cultivator. If he transfer it to someone else for cultivation on Bataii.
Then this Bataii will be paid to the owner
Bankruptcy:
If a person files the bankruptcy due to his sever financial crisis. Scholars have mentioned few
laws for that Bankrupt. Which are summarized below
Bankrupt can be set free from his debts/dues due to filing the bankruptcy. Court will recover the
dues for the lender even by selling his property.
Hadith:
it is narrated by Abdur Rehman bin Kaab bin Malik rt that Muaaz rt was a very charitable young
person. He did not keep savings. He use to take loans for charities until his whole
wealth/property was pledged. He came to Prophet pbuh and requested him to talk to the lenders.
If the lenders would be able to forgive Muaaz rt but they did not do so. Then Prophet pubh
started selling out his stuff/goods for the lenders until Muaaz rt stood up empty handed.
(Mishkaat)
If the lender sees his own maal/good/item with debtor, he must take it back. E-g:It is narrated by
Abu Hurairah rt that Prophet pbuh said, whosoever becomes bankrupt and the lender sees his real
good with him. He has the most right to get it back. (Agreed Upon)
If the lenders are more than one, then the court can take the assets of debtor and will distribute
among the lenders according to their percentage. E-g:
It is narrated by Abu Saeed Khudri rt that at the time of Prophet pbuh, one person bought fruits
and made loss in it. He became bankrupt. Prophet pbuh addressed the people to pay him sadaqah.
People paid sadaqah to him. But it was not sufficient to pay his debts in full. Then Prophet pbuh
said to the lenders, take what you get and nothing you will get more than this. (Muslim)
If the person gets bankrupt, then all the assets, he keeps in his possession are no longer belong to
him. He doesnt have the right to use them. Court can do inhibitation / stop him of using those
assets.
Hadith:
Kaab bin Malik rt narrates from his father that Prophet pbuh has stopped Muaaz bin Jabal rt of
using his assets/goods and then sold it out to pay for his dues. (Abu Dawood, Dar Kutni)
Price Control:
According to the Islamic principles, the prices of the market are under the control of law
of supply & demand. One of the main reason / source of the fluctuation of prices is due to
the shortage of basic need products, which happens due to unislamic activities like
storage (Ihtiqaar) etc. Islam strictly forbids all these kind of activities and opens the door
of free market for everyone. When all those goods will be brought into the market
without any restrictions and their demand and supply will be on natural basis then this
will help to keep the prices of the products on a balanced level.

Islam has not allowed any Govt. to impose restriction on prices and price level as well as
on demand and supply law. It will be the duty of the Govt. to control this man produced
shortage of products, eradicate and discourage the sources of monopolies and Ihtikaar
(hoarding). But if the shortage of any good occurs due to any natural disaster, then it
becomes the duty of the State to control even from the outside sources

Once during the time of Caliph Umer rt, sign of drought occurred and prices of the
products rise high. He immediately imported wheat and other goods of basic needs on a
large scale from Syria and Egypt and controlled the happening of drought and the rise of
prices. (Ibn Jouzzi, Seerat Umar Bin Khattab, P. 154)





Desirable Business
Musharikah
Muzaribah
Definition of musharakah
The literal meaning of Musharakah is sharing. The root of the word "Musharakah" in Arabic is
Shirkah, which means being a partner.
Islamic banking is banking or banking activity that is consistent with the principles of sharia and
its practical application through the development of Islamic economics. As such, a more correct
term for 'Islamic banking' is 'Sharia compliant finance'.
Conditions of Musharikah
Partners must do the Ijab-o-Qubool
Musharikha must be done in existing and acceptable currencies. If it is in shapes of
commodities/goods, then the price estimation (appraisal) of those goods must be made in
the beginning of the agreement.
According to Imam Shafi rt, all kinds of goods / commodities / currencies must be mixed
up completely to avoid confusion. In that case, everybody will be careful in the business
in spending, and will not think/worry of his share of investment.
According to Imam Sarkhasee rt, it is a condition for an Agreement, that it must be in
written form with all and clear details to avoid confusion and problems in the future.
Hadees-e-Qudsi
ALLAH Subhan-o-Tallah has declared that HE will become a partner in a business
between two Mushariks until they indulge in cheating ar breach of trust (KHAYANAH).
O Believers, when you make any deal of Loan for some certain time, write it down.
(Al Baqarah, 2: 282)
Types of Musharikah (Partnership):
There are four kinds of partnership in Islamic Law
SHIRKAT-AL-ANAN
In this partnership partners contribute their share in cash. Contribution of capital is also not
equal. The profit or loss is also divided on the basis of Capital amount. The liability of each
partner is limited to his invested capital. This type of partnership can be formed between any two
parties (Women, Children, Muslims, and Non Muslims). Generally one partner provides the
major source of finance. A partner has no right to lend anything out of joint assets of the firm.

SHIRKAT-AL-MUFAVADHA
In this partnership, each partner provides equal capital. Each partner has equal share in the profit
and loss. Each partner is helper and agent of the other partner. All the partners have an equal
status. There is a written agreement. It cannot be formed between the slave persons.
Rights and Duties : In this partnership each partner has the right to negotiate or do any business
contract on the behalf of the other partners.
SHIRKAT-AL-SANAI or SHIRKAT-AL-TAQQABAL
It is an associate of different skills involved in business. Skilled persons like manager,
accountants and labourers provide their skill. While capitalists provide their capital all these
people join together to start the business. The profit is distributed among them according to terms
of agreement.
SHIRKAT-AL-WAJOOH
This type of partnership is formed by agreement for the object of purchasing goods on credit in
order to supply them in the market. One partner is an agent of another partner. The profit and
loss is distributed equally. In this partnership no partner contributes any amount of capital in
business.
Muzaribah
Definition of muzaribah
This word Muzaribat came out from word Zarbun. It means steping on ground, walking etc.
In this business, Muzarib walks on the ground for other, thats why he is called Muzarib and this
business is called Muzaribah. Some Imams call it Qarraaz.
Muzaribat is a type of business where one party provides the full investment and the other
provides its professional business services and the profit share is divided with mutual
understanding.
And there are some people, who walk on the ground (earth) and seek the provision (Rizq)
of Allah. (Surah Muzammil, Chp: 29: V: 20)
Purpose:
Muzaribah is allowed to reduce the gap between poor and rich. An individual, who is
financially strong but cant run the business either because of having no time, or no
experience or no awareness of the market. On the other side, there are individuals, who
are financially not strong but very skilled and experienced in some certain business. So
they can take the investment from rich and run the business.
Islam has allowed this type of business for the benefit of poor & rich, skilled & non
skilled. Another wisdom behind it is, Money will always be circulated in the market.
Public will take more economical benefits in shape of having more jobs opportunities,
higher competition and lower prices of the products etc.

Muzaribah by Prophet pbuh:
Prophet pbuh did that form of business with Khadija rt
Goods were taken to the market of Busra (Syria)
Agreed profit sharing ratio was 50% for each.
Slave Maysera were there joined as an Auditor
Sahaba rt did that kind business in their time as well.
All Imams and scholars consider it one of the most favorable businesses of Islam.


Conditions of Muzaribah:
o Rab-ul-Maal must make all the investment in cash form even goods are provided.
o Investment must be provided by Rab-ul-Maal only. Otherwise it will be counted
partnership (Musharikah).

Authorities & Responsibilities of Muzarib:
Investment of Rab-ul-Maal is like an Amanat (Trust) with Muzarib. Therefore, if loss
occurs in the business, Rab-ul-Maal cant demand for the recovery of his investment from
Muzarib.
In Muzaribah, the position of Muzairb is like the custodian of the investment of Rab-ul-
Maal. Therefore, he is always bound to take the suggestions, advice, permission of Rab-
ul-Maal in making decisions.
Muzarib is not allowed to take any salary from the business. If he is traveling outside, he
is allowed to take the daily traveling wages / allowance and other cost etc. According to
Imam Abu Hanifa, he is also allowed to take medical charges from the business in case of
sickness.
Muzarib will get his profit share only. If he crosses his limits of the agreed agreement of
Muzaribah, he will be responsible and liable for all loss/liabilities.
Muzarib will always divide the share of the profit in the presence of Rab-ul-Maal. It is
the opinion of all Imams.
Cancellation of Muzaribah:
According to Imam Abu Hanifa rt and Imam Shaif rt.:
Muzaribah can be canceled any time just by giving a notice to the other party.
It can be cancelled at the death of any partner. If the inheritors want to renew or continue this
agreement, it is allowed in Islam.





Readable Books:
Al Hasabah Fil Islam
(by Ibn Taimiyaah)
Al Siyasah fi Ahwaal ir Raaiee war Raiyyat
(by Ibn Taimiyaah)
Maalim ul Qurbat fi Ahkaam ul Hasabah
(by Ibn Akhuwaat)
Al Turuq ul Hukmiyyat fis Siyaasah Al Shariya ]
(By Ibn Qayim Al Jouzi)
Al Ahkaam us Sultaniyah
(By Al Mawardi)




































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