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Third Fiqhi Seminar

Date: June 08-11, 1990 Venue: Bangalore

The Third Fiqh Seminar was held between June 8 -11, 1990 at Darul Uloom Sabeelur Rashad, Bangalore. Maulana Rafi Usmani of Pakistan and Dr. Mehroos Al-Mudarris of Iraq were the guest scholars.
Legal aspects of Islamic Banking and practical difficulties in its way were reviewed and the Juristic and legal aspects of the subject were discussed. Papers on the subject of sale and purchase of rights were presented and debated. The discussion ended with the detailed scholarly paper by Dr. Mehroos Al-Mudarris.

The proposals which were accepted in the Seminar are as follows:

Islamic Banking

Regarding Islamic Banking it was decided that it should be based on Muzarabah, Musharakah, Ijarah and Murabaha and should necessarily be kept clean of Riba (interest). To chalk out its practical aspects a committee of economic experts and Islamic scholars was formed consisting of :

  1. Dr. Rahmatullah Ansari
  2. Dr. Abdul Haseeb
  3. Dr. K. G. Munshi
  4. Dr. Fazlur Rahman Faridi
  5. Dr. Nejatullah Siddiqui (Saudi Arabia)
  6. Dr. Mohmmad Manzoor Alam
  7. Dr. Mohammad Anwar (Malaysia)
  8. Janab Abdul Wahab Delvi
  9. Mufti Saeed Ahmed Palanpuri
  10. Maulana Khalid Saifullah Rahmani
  11. Maulana Ateeque Ahmed Bastavi
  12. Maulana Mujahidul Islam Qasmi

Islamic Banking - Guidelines

The following guiding principles will have to be kept in mind while preparing the scheme for an Islamic banking system.

If an organ of a person stops functioning and for the purpose of restarting its functioning it becomes necessary to replace tht organ, it is lawful to use:

  1. Interest-bearing deals and transactions of all kinds involving interest are strictly prohibited in Islam.
  2. Islam holds justice to all the parties to economic and commercial transactions as prime condition which means full justice to the investor and the entrepreneur both. The investor should have a share in porift and must also fully bear the loss, if any, while the entrepreneur should have a share in profit and in case of loss should stand deprived of any return for his labour.
  3. Money should be treated as a means for procuring the necessities and conveniences of life and not as an end in itself.
  4. Capital should be regarded as a trust from Allah to be utilised to meet the real needs of men and to improve their economic potential, unlike the current manner of utilisation by the investors and the Banks whch is aimed simply at multiplying the wealth.
  5. Distribution of wealth should be in a manner so as to improve the economic condition of the weak and backward classes of people and to minimise inequitability and disparity in its distibution. Keeping this in view, the Islamic Banks, while providing the capital, should give precedence to necessities over luxuries and keep the ratio of their profit at a level conducive to give encouragement to small entrepreneurs.
  6. There should be a check on all such means of acquisition of wealth which are commonly practised these days but are outstandingly dishonest and deceitful.
  7. Besides adhering to the above guidelines and while keeping in mind the general objects of Islamic socio-economic system, care should be taken to retain its moral spirit and the values of honesty and truthfulness that go with it, so that it may not be a soul-less mechanical exercise but should effectively replace the contemporary system which is based on hypocricy, exploitation and selfishness, with one founded on compassion, good-will and fraternal cooperation.

With this end in view this Seminar decides to set up a Committee comprising Islamic scholars and experts in the science of economics to formulate a scheme for a new fiscal system embodying the principles of Shariah and the guidelines mentioned above which may, keeping in view the cnditions prevailing in India and the problems facing Muslims, be in consonance with the aspirations of Muslims and the values they cherish and may also provide solution to their real economic problems.

Murabaha or Mark-up Pricing

The Seminar also considered at length the issue of Murabaha (Mark-up Pricing) and after due deliberations arrived at the following conclusions :

  1. The term Murabaha has a definite connotation with Muslim jurists.
  2. Only those forms of Murabaha have been considered by the Seminar which are currently in vogue among Islamic Banks.
  3. It is an established principle of Islamic jurisprudence that the object is central to all transactions and not the nomenclature they go under. Hence, the deals made under the name of Murabaha will have to be scrutinised in accordance with their nature, not resting content with just the name those are made under.
  4. Besides the commonly known conditions covering Murabaha, all deals entered into by the Islamic banks as Murabaha, will be Islamically permissible only when:
    1. The quotation forms issued by the banks give full description and quality of the goods offered for sale and in which other necessary particulars have been fully and clearly mentioned so as to eliminate the possibility of disputes between the contracting parties because of lack of full information or ambiguity. Moreover, the profit to accrue to the bank (Sale-Price) over its purchase price or cost price along with the terms of payment i.e., the period of payment and quantum of instalments should also be clearly mentioned.
    2. It will not be proper to quote, at the time of making the deal, two separate sale-price, one for down payment sale and the other for credit sale, or to link the sale price with the length of payment period at the time of making the deal. The Bank should show the sample of commodity offered for sale and should clearly inform the buyer about the period and the number of instalments fixed for the payment and the quantum of profit to the Bank which will be the purchase price for the buyer from the Bank.

Interest-free Loan Societies

The functioning of interest-free loan societies and problems relating to the same were considered in the Seminar. The conclusions arrived at after due deliberations are:

  1. Such institutions are welfare institutions in their nature which are based on compassion, righteousness, virtue and fellow-feeling.
  2. To collect any amount, by whatever means, from the debtor over and above the actual loan amount is not permitted in Islam as all amounts so collected fall within the category of interest. Hence to collect any excess amount, be it for the benefit of one’s own self, or the loaning institution or for the purpose of financing any other charitable or welfare institution, is Islamically not at all permissible. Similarly it is also haram (prohibited) to put the amounts belonging to such institutions as fixed deposits in banks and utilise the interest accruing thereupon.

As to the finances necessary for the operational expenses of such institutions, this Seminar suggests the following measures:

  • The charity-minded well-off and affluent persons should bear all the operational expenses treating it as an act of service for their community and to seek the pleasure of Allah. If such institutions succeed in bringing it home to the people that they operate strictly within the bounds of Shariah under the guidance of Ulama and by offering financial assistance to their brethren to save them from the curse of interest, it is strongly hoped that the affluent Muslims will come forward to shoulder the burden of the operational costs of such institutions and even to provide finances for the expansion of their activities.
  • This Seminar is of the view that such institutions should try to invest a part of the capital in their hands in productive ventures to earn some jaiz (Islamically permissible) income, at least to the extent of being able to meet the operational costs of the institutions.
  • Many of the participant Ulama are of the view that service charges of operational costs, though indispensable and even if at the level of bare acatual, cannot be charged to the creditors. Some other Ulama hold that although in essence, this may be Islamically permissible, it should necessarily be held as impermissible as inherent in it is the danger of the door for interest getting opened.

Some other participating Ulama put forth the view that in as much as setting up of such welfare instituions fulfil a great need of the community and in case required cooperation from the well-to-do of the community is not forthcoming, nor it be possible to generate capital for the operational costs through Islamically lawful productive investments, in that case the actual cost neccessary to meet the opeational cost may be charged to the debtors because the amount thus collected goes neither to the persons colleting it nor forms a source of income for the institution’s perse.

However, even those holding this view are firmly of the opinion that as charging any amount to the debtor over and above the loan amount is quite against the Islamic spirit of loaning and since it is to be permitted only because of its unavoidability, extreme care should be taken in computing the operational costs to be charged to the debtors.

In case the operational costs, estimated with great caution and collected from the debtors, are found, at the end of the accounting period, to be in excess of the actual expenditure incurred, it would be incumbant on the institution, according to Shariah, to return the balance to the debtors from whom it had been collected, on pro rata basis.

Sale of Rights

After due deliberations on the question of sale and purchase of rights the Seminar arrived at the following conclusions:

  1. Commodity is central to all sale transactions
  2. As to what constitutes commodity has not been specified by the Shariah, it will have to be determined in accordance with contemporary usages, provided they do not conflict with the Shariah.
  3. It is not Islamically permissible to obtain consideration for those rights which are not rights inpersonem but are meant to save the person claiming the right from some harm e.g. the right of preemption.
  4. It is permissible to obtain consideration for such right as have been so classified by the Islamic Shariah and have come to have their value in terms of money and obtaining which is part of usage, and further that they are, in their nature, not meant to save the perosn from some harm and are otherwise not in conflict with the general objectives and principles of Shariah.
  5. For determining the nature of right which, according to contemporary usage are, subject to the conditions stated above, fit to be sold and purchased for consideration, reference should be made to authentic theological institutions and scholars for their verdict.

Inter-School Debates

The Seminar requested the management of Arabic Madrasas that :

  1. Inter-School debates should be held to promote among the students the capability to correlate the principles of Shariah with modern conditions and to acquaint them with present problems and also the problems coming for consideration before the Fiqh Seminar and other contemporay problems. The Islamic Fiqh Academy, on its part, offers to request any of the prominent theologians to participate and cooperate in such debates, if so desired.
  2. This Semianr thinks it also desirable for the Islamic Madrasas to arrange for periodic lectures by experts on economics and other modern sciences so that the students may be ble to acquire an elementary knowledge of these sciences and are able to correlate them with the principles of Shariah. The Islamic Fiqh Academy offers its cooperation in this regard.
  3. The Seminar thinks it necessary that students and scholars from educational institutions of modern sciences be invited to workshops and camps to impart to them the basic knowledge of fundamentals of Islam, the basic principles and history of Islamic laws and their capability to provide guidance in every age, and of the necessary terminology. The Seminar calls upon the Islamic Fiqh Academy to take necessary steps in this regard.

 

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