While every conscious Muslim is aware of shari’a requirements for weighing, measuring and counting in commerce and trade, not everyone is cognizant of the surrounding issues related to conducting business and financial transactions. Islam takes a very measured and careful approach in commerce and trade to ensure that justice prevails and the probability of dispute and disagreement is minimised. Furthermore, it is one of the objectives of shari’a to require its adherents to protect and preserve their wealth and property. Thus, it is prohibited to deal in interest in order to ensure justice prevails; it is prohibited to enter into contracts that are not clear in their terms and conditions; and it is prohibited to excessively speculate and gamble.
There are a number of things which shari’a requires adherence to because doing so will be in the best interest of the weaker party to a transaction. For example, it is prohibited to exchange a fungible item, like gold, in unequal quantities. Many women buy new jewellery items by trading-in their old jewellery items. For example, a woman may end up exchanging a bangle 2.5 tolas in weight for another bangle (of new design) weighing only 2 tolas. This is quite a ubiquitous practice. Shari’a guidelines in such a case are simple. If a jewellery item is weighed and sold as gold, then its exchange in unequal quantities equates with the prohibited interest (known as riba in Arabic). The correct way of dealing in exchange of gold (or silver) jewellery is as follows:
The jeweller must first buy the old item from the customer for an agreed price, and issue a purchase receipt specifying price and the weight of gold and its quality in terms of karats. It is permissible in shari’a to offset the prices by one party paying only the price differential. This is the correct way of exchanging gold and silver and, in fact, any fungible commodity. Sometimes, jewellers exchange such items without specifying and agreeing on the prices and weights and qualities of the traded-in items. Shari’a does not allow such practices. Similarly, many commodity traders enter into barter by exchanging less of a high quality commodity with more of a lower quality commodity of the same genre. This is clearly prohibited by the Prophetic tradition. It is prohibited to exchange one tonne of a higher-grade basmati rice with more than a tonne of a lower-grade basmati rice.
This principle has great implications for the exchange of commodities and even money. Following this principle, it is not permissible for someone who lends rice at the time of harvest (the new rice is considered less valuable than old and mature rice) to contractually receive a lower amount of the old (mature) rice at the end of the crop cycle. It is also a common practice to stipulate a penalty clause in loan contracts, requiring a defaulting borrower to pay an additional amount for delay in payment. This is an unmistakable violation of the Quranic guidelines that prohibit such penalties. In the contemporary debt-based financing system, however, it is now accepted by the modern-day jurists to stipulate such penalties, if it is intended to curb the moral hazard problem (wilful default), as long as the amount charged in the form of penalty is given away in charity to a third party. This is now commonly practiced by Islamic banks to curb deliberate default by delinquent customers. Although it is permissible to trade in different currencies, it must be observed that shari’a allows exchange of one currency (say rupees) for another one (say US dollars) only on a spot basis. Therefore, it is not permissible for someone to pay Rs.100,000 today to receive US$1,400 after one month. In conclusion, it is important that the Muslims follow shari’a requirements in social and commercial matters; to adopt a lifestyle that is commensurate with the Islamic doctrines. It will establish social justice – something missing in a country like Pakistan – and will pave the way for a better society imbued with the Islamic values.
The writer is a Shari’a advisor to a number of banks and financial institutions and can be contacted at [email protected]
