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ISLAMIC MODES OF FINANCING AN INTERMEDIATE PRIMER AUSAF AHMAD.

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Presentation on theme: "ISLAMIC MODES OF FINANCING AN INTERMEDIATE PRIMER AUSAF AHMAD."— Presentation transcript:

1 ISLAMIC MODES OF FINANCING AN INTERMEDIATE PRIMER AUSAF AHMAD

2 ISLAMIC PRINCIPLES OF TRANSACTIONS Should not indulge in Riba Should not indulge in Riba Should not involve in Gharar Should not involve in Gharar Should not indulge in fraudulent behavior Should not indulge in fraudulent behavior Should not coerce Should not coerce Should not take advantage of anybodys needs Should not take advantage of anybodys needs Should not withhold supplies to raise prices Should not withhold supplies to raise prices Should not withhold information to take advantage of ignorance. Should not withhold information to take advantage of ignorance.

3 Prohibition of Riba in Quran FIRST REVEALATION: That which you give as Riba (interest) the peoples wealth increases not with God; but that which you give in Charity, seeking the goodwill of God, multiplies manifold. [ 30 : 39]

4 Prohibition of Riba in Quran [contd.] SECOND REVEALATION: And for their taking interest even though it was forbidden for them, and their wrongful appropriation of other peoples property, We have prepared those among them who reject faith a greivous punishment. [4: 161]

5 Prohibition of Riba in Quran [contd.] FOURTH REVELATION FOURTH REVELATION Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; that is because they say: Trade is like interest while God has permitted trade and forbidden interest. [2: 275]

6 Prohibition of Riba in Quran [contd.] God deprives interest of all blessings but blesses charity. He loves not the ungrateful sinner [2: 276] O believers ! Fear Allah and give up interest that remains outstanding, if you are true believers. [2: 278] O believers ! Fear Allah and give up interest that remains outstanding, if you are true believers. [2: 278]

7 Riba in Hadith From Jabir: The Prophet (pbuh) cursed the receiver, the payer of interest, the one who records it and the two witnesses of the transaction and said: They are all alike (in guilt) From Jabir: The Prophet (pbuh) cursed the receiver, the payer of interest, the one who records it and the two witnesses of the transaction and said: They are all alike (in guilt) [Reported by Muslim, Tirmidhi and Ahmad]

8 Riba in Hadith [contd.] Jabir b. Abdallah said: The Prophet (pbuh) said, All of the riba of Jahiliyah is annulled. The first riba that I anul s our riba, that accruing to Abbas b. Abd al Muttalib; it is being cancelled compeletely. [ Reported by Muslim and Ahmad ]

9 TYPES OF RIBA RIBA OF DEBT (Riba al Diyun) RIBA OF DEBT (Riba al Diyun) RIBA OF TRADE (Riba al Fadl) RIBA OF TRADE (Riba al Fadl) Both types of Riba is prohibited in Islam. Riba al Diyun is also known as Riba al jahiliah. It is prohibited by the Quranic injunctions. Riba al Fadl is prohibited by Hadith of the Prophet (pbuh). Both types of Riba is prohibited in Islam. Riba al Diyun is also known as Riba al jahiliah. It is prohibited by the Quranic injunctions. Riba al Fadl is prohibited by Hadith of the Prophet (pbuh).

10 RIBA OF Debt [Riba al diyun] Riba of the period of Jahiliyah: Prevailing in Arabia before the advent of Islam Riba of the period of Jahiliyah: Prevailing in Arabia before the advent of Islam Prohibited on the strength of Quranic injunction. Prohibited on the strength of Quranic injunction.

11 RIBA OF TRADE [ Riba al fadl] The Prophet (pbuh) said: Gold for Gold, Silver for Silver, Wheat for What, barley for barley, dates for dates, salt for salt - like for like, hand to hand. Whoever pays more or takes more, indulges in Riba. The taker and giver are alike (in guilt). The Prophet (pbuh) said: Gold for Gold, Silver for Silver, Wheat for What, barley for barley, dates for dates, salt for salt - like for like, hand to hand. Whoever pays more or takes more, indulges in Riba. The taker and giver are alike (in guilt). Narrated by : Abu Saeed Khudri Narrated by : Abu Saeed Khudri Reported by: bukhari Reported by: bukhari

12 AVOIDANCE OF GHARAR Definition of Gharar Definition of Gharar Uncertainty / Ambiguity Uncertainty / Ambiguity Ambiguity of Quantity [Gharar fil Miqdar] Ambiguity of Quantity [Gharar fil Miqdar] Ambiguity of Attributes [Gharar fis sifah] such as Ambiguity of Attributes [Gharar fis sifah] such as Ambiguity in time or place of delivery Ambiguity in time or place of delivery Ambiguity in price etc. Ambiguity in price etc.

13 DEBT FINANCE Vs. PARTICIPATORY FINANCE Participatory finance, in comparison, to debt finance is: Participatory finance, in comparison, to debt finance is: – More just –More equitable –More efficient –More growth oriented.

14 TYPES OF ISLAMIC CONTRCTS Islamic Contracts MuwadatMusharakatTabarruat

15 TYPES OF ISLAMIC CONTRCTS [contd.] Contracts of Sale / Lease are Muawadat. Gharar is not allowed in such contracts. Contracts of Sale / Lease are Muawadat. Gharar is not allowed in such contracts. Mudarabah and Musharakah are contracts of Musharakat. Some amount of gharar may be tolerated in such contracts. Mudarabah and Musharakah are contracts of Musharakat. Some amount of gharar may be tolerated in such contracts. Sadaqat and Hadaya are Tabarruat. No objection to Gharar in these type of contracts. Sadaqat and Hadaya are Tabarruat. No objection to Gharar in these type of contracts.

16 DISADVANTAGES OF RIBA BASED FINANCE Riba based finance is inefficient. Riba based finance is unjust Riba based finance discourages growth. Riba based finance leads to economic instability. Riba based finance leads to economic inequality. Riba based finance is inefficient. Riba based finance is unjust Riba based finance discourages growth. Riba based finance leads to economic instability. Riba based finance leads to economic inequality.


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