Monday, April 05, 2010

Murabahah

1. Murabahah is a particular kind of sale where the seller expressly mentions the cost of the sold commodity he has incurred, and sells it to another person by adding some profit or mark-up thereon.

2. The profit in Murabahah can be determined by mutual consent, either in lump sum or through an agreed ration of profit to be charged over the cost.
3. All the expenses incurred by the seller in acquiring the commodity like freight, custom duty etc. shall be included in the cost price and the mark-up can be applied on the aggregate cost. However, recurring expenses of the business like salaries of the staff, the rent of the premises etc. cannot be included in the cost of an individual transaction. In fact, the profit claimed over the cost takes care of these expenses.
4. Murabahah is valid only where the exact cost of a commodity can be ascertained. If the exact cost cannot be ascertained, the commodity cannot be sold on murabahah basis. In this case the commodity must be sold on musawamah (bargaining) basis i.e. without any reference to cost or to the ratio of profit / mark-up. The price of the commodity in such cases shall be determined in lump sum by mutual consent.
Example (1) A purchased a pair of shoes for Rs. 100/-. He wants to sell it on murabahah sale is valid.
Example (2) “A purchased a ready-made suit with a pair of shoes in a single transaction, for a lump sum price of Rs. 500/-. A can sell the suit including shoes on murabahah. But he cannot sell the shoes separately on Murabahah, because the individual cost of the shoes is unknown. If he wants to sell the shoes separately, he must sell it at a lump sum price without reference to the cost or to the mark-up.
Murabahah as a mode of financing
Originally, murabahah is a particular type of sale and not a mode of financing. The ideal mode of financing according to shariah is mudarabah or musharakah. However, in the perspective of the current economic set up, there are certain pratical difficulties in using mudarabah and musharakah instruments in some areas of financing. Therefore, the contemporary shariah experts have allowed, subject to certain conditions, the use of the murabahah on deferred payment basis as amode of financing. But there are two essential points which must be fully understood in this respect:
1. It should never be overlooked that, originally, murabahah is not a mode of financing. It is only a device to escape from “interest” and not an ideal instrument for carrying out the real economic objectives of Islam. Therefore, this instrument should be used as transitory step taken in the process of the Islamization of the economy, and its use should be restricted only to those cases where mudarabah or musharakah are not praticable.
2. The second important point is that the murabahah transaction does not come into existence by merely replacing the word of “interest” by the words of “profit” or “mark-up”. Actually, murabahah as a mode of finance, has been allowed by the Shariah scholars with some conditions. Unless these conditions are fully observed, murabahah is not permissible. In fact, it is the observance of these conditions which can draw a clear line of distinction between an interest-bearing loan and a transaction of murabahah. If these conditions are neglected, the transaction becomes invalid according to shariah.

Source: An Introduction to Islamic Finance By Muhammad Taqi Usmani
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Thursday, March 18, 2010

Islam in Southeast Asia

Asia is home of 65 percent of the world's Muslims, and Indonesia, in Southeast, is the world's most populous Muslim country. This essay looks at the spread of Islam into Southeast Asia and how religious belief and expression fit with extant and modern polictical and economic infrastructures.


It is difficult to determine where Islamic practice begins or ends in any Muslim society, especially as the teachings of Islam encourage Muslims to be mindful of God and their fellow believers at all times. Still, the absence of publicly demonstrated mindfulness of God—whether expressed in terms of the wearing of special dress, such as the many sorts of veils donned by Southeast Asian women, or by recourse to frequent enunciations invoking His name—need not be taken as meaning that the person is any less a Muslim. Indeed, one’s faith is not to be measured by outward acts alone, and Muslim tradition ascribes greater weight to the personal intention of the believer than to outward appearance. Even so, what follows is an explanation of some aspects of the outward expression of Islamic identity in Southeast Asia.

Unity and Diversity

Although the national motto of Indonesia, “Unity in diversity” (Bhinneka tunggal ika), was intended to be an explicitly national one, it is no less applicable to the community of Southeast Asian Muslims, as well as to Muslims the world over. When Muslims come together to worship in the mosque on Friday, or when they perform their daily prayers as individuals, they face the same direction. As such they participate in a unitary tradition. The same might be said of when Muslims greet each other with the traditional Arabic blessing “Peace be with you” (al-salam `alaykum), when they undertake the fast (sawm) during the month of Ramadan, or when they make the pilgrimage (hajj) to Mecca.

If asked about the core elements of their faith and practice, many Muslims will point to the five basic duties of Islam. These consist of the profession of faith (shahada), the daily prayers (salat), the hajj, fasting in Ramadan (sawm), and the giving of alms (zakat). However, there is a whole range of calendrical celebrations and rites of passage associated with Islam, not to mention the simple acts of piety that some perform before carrying out basic actions. This might include invoking God’s name before eating or washing one’s face and limbs before prayer. Once again, these acts are shared across Islamic time and space.

On the other hand, many distinctions between believers of different cultural and theological traditions remain in evidence. Even when the global community of the faithful gather in Mecca for the hajj and don the same simple costume of two unsewn sheets (known as ihram), they often travel together in tightly managed groups of fellow countrymen or linguistic communities—at times with tags displaying their national flags. By the same token, there are many specific local practices that are felt to be thoroughly Islamic in Southeast Asia, but these, on occasion, have been condemned by Muslims of different cultural backgrounds by virtue of their absence in, or displacement from, their own histories. Local practices include the use of drums (bedug) in place of the call to prayer (adhan), or the visitation of the tombs of the founding saints of Java.

Other such examples of distinct Southeast Asian practices might be linked to the wearing of the sarung (a practice shared with Muslims and non-Muslims throughout Southeast Asia and the Indian Ocean), the relatively late circumcision of young males (often celebrated as a major event in village life), the use of shadow puppets (believed by some communities to have been invented by one Muslim saint to explain Islam in the local idiom), or the many popular verse tales of the exploits of an uncle of the Prophet, Amir Hamzah, drawn from Persian and Arabic originals. Even if such practices are regionally distinct or viewed askance elsewhere, if not contested openly, such practices are nonetheless seen as ways of connecting to a faith that is global and egalitarian.

Arabic and the Qur’an

One undeniably universal expression of religiosity is the recitation (qira’a) of the Qur’an, which all Muslims are enjoined to learn as soon as they are able. The Qur’an is understood to be the eternal expression of God’s will revealed through the Angel Gabriel to the Prophet Muhammad, who is believed by Muslims to be the last messenger appointed to mediate between God and humanity. Indeed the Qur’an is also affirmed as the final validation of the messages of all the prophets before him, including those known in the Jewish and Christian traditions. These include Abraham, Joseph, and Jesus, though there are additional figures such as Iskandar (Alexander the Great) and the enigmatic Khidr.

The Qur’an contains stories of all these prophets and many accounts of the difficulties that they—and Muhammad in particular—had in being accepted by their own people before winning them over and establishing God’s law (shari`a) among them. It is further replete with parables ranging over a broad range of human experience, and its recitation brings feelings of closeness to God and His Prophet, as well as solidarity with Muslims all over the world. Some Southeast Asians, such as the Indonesian Hajja Maria Ulfah, have even obtained international recognition for the quality of their recitations.

Yet while the Qur’an may be recited as proficiently, and as often, in Jakarta and Pattani as in Mecca or Algiers, the fact remains that the Holy Text was revealed in Arabic, and in the Arabic of Muhammad’s day. As such all Muslims require explanation of its meanings and those of non-Arab traditions—whether in India, Central Asia or Southeast Asia—require the additional intervention of translation.

The task of the explanation of the divine text is helped, in part, by the fact that Malay (both in its modern Indonesian and Malaysian variants), Javanese, and several other Austronesian languages spoken in insular Southeast Asia, are infused with Islamic terms. This process of linguistic appropriation may be linked with the expansion of a Muslim role in the trade linking the port towns of Southeast Asia, starting in the thirteenth century. It was in this way that the Arabic of the Qur’an, its associated scholarly traditions, and the everyday speech of many of the visiting traders suffused local languages—Malay in particular—with both sacred and profane terms. For example, the Arabic word fard (broadly meaning an obligation), has left two traces in Malay: one with the same sense of a “religious obligation” (fardu), and the other as the more general verb “to need” (perlu).

Regardless of the presence of Arabic elements in the Malay vocabulary that are not specifically religious, Southeast Asian Muslims have long been mindful of the sacred role that Arabic has played in what has increasingly become their history as much as that of Arabs. Certainly, there is a long history of the translation and explication of the Qur’an in the region, although it is important to note that in the Islamic tradition a translation, being the result of human interpretation, may never be elevated to the status of the divine text itself.

This principle, along with heightened contacts with new forms of Islamic thought being propagated from British-occupied Egypt and India in the late nineteenth century, led to debates in the similarly-colonised entities of Indonesia (then the Netherlands Indies) and Malaysia about the legitimacy of attempting to produce a translation—particularly after the widespread availability of printing presses and heightened literacy made it a commercial possibility. Some even argued that written translation (as opposed to the glossing of words and fragments) had never been permitted by Islamic law.

Whether permitted or not, such translations have long been made. Indeed, among the Islamic books brought back to Europe from Southeast Asia in the sixteenth and seventeenth centuries were Qur’anic texts, religious treatises, and works in verse that made use of holy scripture. These include the works of the mystical poet Hamzah Fansuri (d. 1527), who liberally infused his writings with Qur’anic verses, as well as more neutral Arabic, Persian, and Javanese terms, while stressing his distinct identity as a Malay of Fansur, a port-town of Sumatra.
Script and Identity

Alongside its major oral contribution to Southeast Asian Islamic identity, Arabic also has had a visual impact with the adoption of its script for many local languages, with modifications to suit local phonemes such as the sounds “p” and “ng.” By the time Hamzah Fansuri would compose his Malay poems, this phonetic form of writing had already been in use for some three centuries, whether for commemorative stones or for further Islamic propagation. This did not mean that the script displaced earlier methods of writing immediately or permanently. In some cases, local scripts have been maintained for both religious and non-religious texts. Even so, by the time that the Portuguese arrived in Southeast Asia in significant numbers at the beginning of the sixteenth century, Malay was being written primarily with Arabic letters and in a cursive form that is immediately identifiable as pertaining to the region.

In Indonesia, the Arabic script would only be displaced after the widespread popularization of newspapers and school texts in roman script starting in the late nineteenth century, and ever more so in the twentieth when reformist Muslims founded schools to provide the opportunities for modern education largely denied by the Dutch and British. Arabic and Arabic script remain in use in many Islamic schools in Indonesia (now known broadly as pesantren), and both are still used on billboards and signs recommending certain behaviors as Islamic. For example, an advertising campaign in West Sumatra in the 1990s was accompanied by Arabic statements attributed to the Prophet such as “Love of cleanliness is a part of belief ” (Hubb al-nizafa min al-iman).

The Arabic script remains strongly linked to Muslim identity in neighboring Malaysia and Brunei. This is especially the case in Malaysia, with its prominent non-Malay minorities; and it is further discernible in southern Thailand, where the script serves to mark the Muslim community off from the Thai-Buddhist majority and remains the written medium for a considerable local Malay-language publishing industry.

The Study Circle and Its Absence

Whereas Arabic has long been studied by Muslims in Southeast Asia, due to its elevated status as the language of revelation and its importance for connection with the Middle East as the source of Islam, and even though it has made its contribution to the oral and written cultures of the region, the fact remains that Southeast Asians require the aid of teachers and glossaries to make the texts of Islam comprehensible and applicable in daily life. To this end, the months spent learning the Qur’an under the guidance of a teacher is often a crucial period in a child’s life. At the end of this period of study a celebration (known as khatm al-Qur’an) is held in the family home.

More advanced studies of Islam usually require the sort of in-depth education offered by traditional religious schools, such as Indonesia’s pesantrens. Here students learn the requisite texts concerning pronunciation and grammar by the use of glosses in their own languages and various mnemonics or songs. This will allow them to make sense of more advanced works concerning the formal rules laid out in Islamic law defining social interaction, as well as those pertaining to the inculcation of moral values (akhlaq). At all stages a teacher ensures that the individual student has properly mastered a text before advancing to any higher stage of learning. Still, even in these traditional schools—which may be found throughout Southeast Asia and which allow the movement of individuals across national borders— there is a blurring between global religious practice and indigenous cultural expressions. Even when they are in Arabic, many of the songs learned or the texts mastered are related to a specifically Southeast Asian source of inspiration, either from a creator born in the region who assumed a place of importance in Mecca, such as Nawawi of Banten (1813-97), or at the hands of a foreigner who once sojourned through its mosques and fields, such as Nur al-Din al-Raniri (d. 1656). Furthermore, in recent times students have begun to popularize and rephrase many of the popular poems sung in praise of the Prophet. Some musical groups have reached wide audiences by incorporating Arabic lyrics, and Arabic songs have been composed and sung in Southeast Asia with the aim of propagating certain messages among a broader community of Muslims—ranging from gender equity to jihad.

On the other hand, there are also a great many Southeast Asians who never receive such traditional Islamic schooling, who have not learned Arabic or mastered the Qur’an, and for whom such lyrics may be incomprehensible. Many still feel themselves to be full members of the Muslim community (umma), though. For, while they may not fully understand the literal rules of the provisions of Islamic law, they feel that the texts in which it is explained are part of their own Muslim cultural heritage, with which they might connect at rites of passage such as birth, marriage, and the commemoration of death.

Religio-Cultural Intersections and the Modern State

Just as the colonial regimes sought to monitor and regulate the pilgrimage and Islamic schools, the modern state often attempts to play a role in defining religious and cultural practices at both the level of religious obligation and as officially-sanctioned cultural expression. The most obvious interventions may be seen in the specifically national mobilizations for the Hajj. Each year, for example, Indonesia supplies one of the largest contingents of pilgrims (over 200,000 people) for the annual series of ceremonies that take place in Mecca and its surroundings. To get there on such a massive scale necessitates a large degree of national coordination, including the provision of financial support. Beyond finance and coordination though, states also play a proactive role in
determining what variants of religious practice may be tolerated, particularly when those variants seem inimical to the government itself or which contest, sometimes violently, the depth of religious commitment of their fellow countrymen. For example, both Malaysia’s quietist Dar al-Ar qam organization, and the radical Ngruki network in Indonesia have seen their activities stopped or severely curtailed in the past decades.

Less tangible, but no less important, than contesting expressions of Islam framed in political terms or in alternative dress and practice, is the role of the state in presenting the style of religiosity felt to represent best the genius of its peoples. Sometimes the gaze is directed outward, sometimes inward. For example, one might think in terms of the architectural designs for many of the region’s modern mosques, which increasingly have a distinctly internationalist style owing more to India and Arabia than Southeast Asia; with minarets and onion domes and arches added to or supplanting the old multilayered pyramidal roofs.

On the other hand there is the Indonesian national museum for the Qur’an in Jakarta, with its showcase holy text (Al-Qur’an Mushaf Istiqlal) that has one page decorated in the style of each province of the Republic. But while the illuminations of Aceh have a distinct pedigree, many of the others are modern inventions designed to help Indonesians to think of the history of their country and its artistic expressions as an inevitable and natural process of combination given added meaning by Islam.

This is not to say, however, that this has always been the case, or that such increasingly Islamic views of history are universally accepted. Both Indonesia and Malaysia include substantial non-Muslim minorities, minorities that at times have become scapegoats during periods of economic uncertainty or because of the taint of imagined collaboration with colonial forces or even as fifth columnists for international communism. Indeed, Indonesia itself has a strong history as an avowedly secularist state, whose officials once placed more emphasis on the region’s pre-Islamic heritage in the form of temple remains. Its best-known author, the late Pramoedya Ananta Toer, even downplayed the role of Islam in the making of Indonesia and focussed instead on the powerful ideas of unity engendered by resistance to Dutch colonialism across the archipelago.

In either form of history, though, whether the view of an Islamic or an areligious anti-colonial national past, it is important to see Southeast Asians placing themselves in relation to a wider world, a world in which “Islam” offers just one set of civilizational practices to draw upon and which may be freely combined with others. In fact, many of the expressions that feed into globalising trends beyond the reach of the state, and redolent of an Islamic identity, are certainly at great variance to what might be conceived of as “traditional” Islam. Here we might think of the many popular groups that fuse the musical styles of the Middle East and Southeast Asia with a presentation owing something to western music videos, or the instructional literature for children now replete with illustrations drawn in the style of Japanese manga. And, again, there is a sphere of personal reflection and reaction that can seem outside the control of the state or that strives to take more from within the Southeast Asian artistic tradition than what lies beyond, whether in poetic musings on experiences in the mosque, or A. D. Pirous’s luminous canvases, which reflect upon both the eternal message and the troubled experiences of his own Acehnese people, who once fought for Indonesian independence in the 1940s but found themselves newly oppressed in the decades that followed.

Certainly one gains a more intimate view of the inner spirituality of Southeast Asian Muslims in such expressions. Even so, while Muslims are joined to each other by the medium of a religious inheritance in their archipelagic homelands, as well as to the broader Muslim community, in the expression of that identity they are undeniably drawing at all times from the images and sounds of the wider, shared world.

by Michael Laffan
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Friday, March 05, 2010

Baitul-Mal

Baitul-mal according to Fiqh (classic Islamic literature) is the exchequer of an Islamic state. Being public property, all the citizens of an Islamic state have some beneficial right over the Baitul-mal, yet, nobody can claim to be its owner. Still, the Baitul-mal has some rights and obligations. Imam Al-Sarakhsi, the well-known Hanafi Jurist, says in his work “Al-Masut”:
“The Baitul-mal has some rights and obligations which may possibly be undetermined.”
At another place the same author says:
“If the head of an Islamic state needs money to give salaries to his army, but he finds no money in the Kharaj department of the Baitul-mal (wherefrom the salaries are generally given) he can give salaries from the sadaqah (Zakah) department, but the amount so taken from the sadaqah department shall be deemed to be a debt on Kharaj department.”
It follows from this that not only the Baitul-mal, but also the different departments therein can borrow and advance loans to each other. The liability of these loans does not lie on the head of state, but on the concerned department of Baitul-mal. It means that each department of Baitul-mal is a separate entity and in that capacity it can advance and borrow money, may be treated a debtor or a creditor, and thus can sue and be sued in the same manner as a juridical person does. It means that the Fuqaha of Islam have accepted the concept of juridical person in respect of Baitul-mal.

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Saturday, February 13, 2010

Islamic Investment Fund

The term "Islamic Investment Fund" in this chapter means a joint pool wherein the investors contribute their surplus money for the purpose of its investment to earn halal profits in strict conformity with the precepts of Islamic Shari’ah. The subscribers of the Fund may receive a document certifying their subscription and entitling them to the pro-rata profits actually earned by the Fund. These documents may be called ‘certificates’, ‘units’. ‘shares’ or may be given any other name, but their validity in terms of Shari’ah, will always be subject to two basic conditions:

Firstly, instead of a fixed return tied up with their face value, they must carry a pro-rata profit actually earned by the Fund. Therefore, neither the principal nor a rate of profit (tied up with the principal) can be guaranteed. The subscribers must enter into the fund with a clear understanding that the return on their subscription is tied up with the actual profit earned or loss suffered by the Fund. If the Fund earns huge profits, the return on their subscription will increase to that proportion. However, in case the Fund suffers loss, they will have to share it also, unless the loss is caused by the negligence or mismanagement, in which case the management, and not the Fund, will be liable to compensate it.

Secondly, the amounts so pooled together must be invested in a business acceptable to Shari’ah. It means that not only the channels of investment, but also the terms agreed with them must conform to the Islamic principles.

Keeping these basic requisites in view, the equity fund is one of the Islamic Investment Funds, which will be discussed below:

In an equity fund the amounts are invested in the shares of joint stock companies. The profits are mainly derived through the capital gains by purchasing the shares and selling them when their prices are increased. Profits are also earned through dividends distributed by the relevant companies.

It is obvious that if the main business of a company is not lawful in terms of Shari’ah, it is not allowed for an Islamic Fund to purchase, hold or sell its shares, because it will entail the direct involvement of the share holder in that prohibited business.

Similarly the contemporary Shari’ah expert are almost unanimous on the point that if all the transactions of a company are in full conformity with Shari’ah, which includes that the company neither borrows money on interest nor keeps its surplus in an interest bearing account, its shares can be purchased, held and sold without any hindrance from the Shari’ah side. But evidently such companies are very rare in the contemporary stock markets. Almost all the companies quoted in the present stock markets are in some way involved in an activity which violates the injections of Shari’ah. Even if the main business of a company is halal, its borrowings are surplus money in an interest bearing account or purchase interest-bearing bonds or securities.

The case of such companies has been a matter of debate between the Shari’ah experts in the present century. A group of the Shari’ah experts is of the view that it is not allowed for a Muslim to deal in the shares of such a company, even if its main business is halal. Their basic argument is that every share-holder of a company is a sharik (partner) of the company, and every sharik, according to the Islamic jurisprudence, is an agent for the other partners int the matters of the joint business. Therefore, the mere purchase of a share of a company embodies an authorization from the share-holder to the company to carry on its business in whatever manner the management deems fit. If it is known to the share-holder that the company is involved in an un-Islamic transaction. In this case, he will not only be responsible for giving his consent to an un-Islamic transaction, but the transaction will also be rightfully attributed to himself, because the management of the company is working under his tacit authorization.

Moreover, when a company is financed on the basis of interest, its funds employed in the business are impure. Similarly, when the company receives interest on its deposits an impure element is necessarily included in its income which will be distributed to the share-holders through dividends.

However, a large number of the present day scholars do not endorse this view. They argue that a joint stock company is basically different from a simple partnership. In partnership, all the policy decisions are taken through the consensus of all the partners, and each one of them has a veto power with regard to the policy of the business. Therefore, all the actions of a partnership are rightfully attributed to each partner. Conversely, the policy decisions in a joint stock company are taken by the majority. Being composed of a large number of share-holders, a company cannot give a veto power to each share-holder. The opinions of individual share-holders can be overruled by a majority decision therefore, each and every action taken by the company cannot be attributed to every share-holder in his individual capacity. If a share-holder raises an objection against a particular transaction in an Annual General Meeting, but his objection is overruled by the majority, it will not be fair to conclude that he has given his consent to that transaction in his individual capacity, especially when he intends to refrain from the income resulting from that transaction.

Therefore, if a company is engaged in a halal business, but also keeps its surplus money in an interest-bearing account, wherefrom a small incidental income of interest is received, it does not render all the business of the company unlawful. Now, if a person acquires the shares of such a company with clear intention that he will oppose this incidental transaction also, and will not use that proportion of the dividend for his own benefit, how can it be said that he has approved the transaction of interest and how can that transaction be attributed to him?

The other aspect of the dealings of such a company is that it sometimes borrows money from financial institutions. These borrowings are mostly based on interest. Here again the same principle is relevant. If a share-holder is not personally agreeable to such borrowings, but has been overruled by the majority, these borrowing transactions cannot be attributed to him.

Moreover, even though according to the principles of Islamic jurisprudence, borrowing on interest is a grave and sinful act, for which the borrower is responsible in the hereafter; but, this sinful act does not render the whole business of the borrower as haram or impermissible. The borrowed amount being recognized as owned by the borrower, anything purchased in exchange for that money is not unlawful. Therefore, the responsibility of committing a sinful act of borrowing on interest rests with the person who willfully indulged in a transaction of interest, but his fact does render the whole business of a company as unlawful.

Source: An introduction to Islamic Finance by Muhammad Taqi Usmani
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Tuesday, December 15, 2009

Islamic Shariah Bank

The Islamic Shariah Bank providing a service of the collection of money, the channelization of money, selling, purchasing, insurance and so on. The selling and purchasing is basically done by the method of barter/transfer of property. The Bank decides its profit in the initial transaction, and includes the profit together with the real price. And the value of property in transaction will be adjusted according to the form of payment and the period of giving a payment, this system is also commonly known in Islamic Banking as murabahah, salam and istishna’.


In this article, I would like to draw my attention the point of Selling and Purchasing in Islamic way and Selling and Purchasing according to credit system.

Trading and purchasing in according to Islamic law (Shariah) and in according to Credit System.

وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا
“And Allah has permitted selling and purchasing and ban the riba” (Al-baqarah 2:275)

Islam allow the selling and purchasing publicly, and the Ulama (Islamic Scholars) also allows the selling and purchasing by credit system, among those ulamas who allow this type of selling and purchasing are Syaikhul Islam Ibnu Taimiyah, Imam Ibnul Qoyyim, Syaikh Abdul Aziz bin Baz, Syaikh Muhammad bin Sholih Al Utsaimin, Syaikh Al Jibrin and so on. But the Islamic Scholars agreed that the selling and purchasing are not at all free, there are certain rules must be followed during the transactions, here are some important points to notice during the transaction in according to Islamic law:

1. The payment can be paid later after the transaction

a. This is based on Qur’an
O you who believe! When you contract a debt for a fixed period, write it down (Al-Baqarah : 282)

b. Based on Hadith:
From Aisyah R.A said, Truelly that Prophet PBUH purchased a food from a Jew and he give a payment later, Prophet Give his iron clothe for the guarantee of payment. (Bukhari and Muslim)

2. Secondly, to add price after transaction is permitted due to an early of payment and due to a credit payment.

a. This is based on the Qur’an:
O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent. (An-Nisa’: 29)

Thus, it’s explained that all transaction as long as it is done by mutual consent is permitted.

b. Based on Hadith:
“During the prophet PBUH visit to Madina and the traders are selling the fruits with pay early trading for a period of one year or two years, the prophet PBUH said: “Whoever sale and purchase in paid early trading, should be in a equal dosage, and obvious weight and until the clear period of time”. (Bukhari and Muslim)

From the above proof of hadith, it is clear that prophet PBUH allowed the pay late trading with the clear passage of time, and with the clear weight and dosage, and it is also prevail for the credit system trading as well as cash payment trading.

3. The Proof of Consensus (Dalil Ijma’)
Muslim scholars agree that the trading by credit system with different price is permitted, among the scholars who agree with this argument are:

1. Syaikh Bin Baaz
When was questioned regarding on a legal to sell a sack of sugar and other things at 150 Riyals by credit. In which the value is equal to 100 riyals in cash sale. Then he remarks:
“The transaction of money in this way is allowed, furthermore the muslim is getting use of this transaction, and according to the consensus it is allowed to do a transaction among them in such a way, and it is not a riba.” (Ahkamul Fiqh, Syaikh Abduloh Al Jarulloh, Page: 57 – 58)

2. Syaikh Muhammad Shalih Al Utsaimin
He remarks on his book Al Mudayanah Page 4 “kinds of debt and trust”

Someone wanted to buy a commodity but he wasn’t have a money in cash to pay, he decided to buy a commodity and the money will be paid after period of time, with a condition that a price will be more higher then that if he pay it in cash. And this kind of transaction is allowed.
Presume: Someone buy a house for him self or for rent with a sum of 10.000 Riyals by a late fee till one year, in which if he could pay it in a cash it will cost only 9000 riyals, or if someone wanted to buy a car for him self or for rent with a sum of 10.000 riyals by a late fee till one year, in which if he could pay it in a cash it will cost only 9000 riyals.

Allah said in Qur’an:
“O you who believe! When you contract a debt for a fixed period, write it down.” (Al-Baqarah verse: 282)

Someone wanted to buy commodities but the fee would be paid in a fixed period, as he wants to sell those commodities.
Presume, someone buy a wheat and will pay the fee in a fixed period, but the price is higher then that if he buys it in cash, according to Syaikh it is allowed based on the qur’an above. And these kinds of transaction are also allowed by Syaikhul Islam Ibnu Taimiyah, based on the Qur’an and Sunnah and proof of consensus by scholars. (Majmu’ Fatawa 29/498-499)

4. The Proof of Measurement (Dalil Qiyas)
There is similarity between a credit fee and early payment fee, both of this transaction is allowed by Prophet Muhammad PBUH assuming that both of this transaction is late in receiving their fee or commodity. But, incase of early payment fee the money will be paid in advance but a commodity will be received later, similarly in case of credit fee the commodity is received in advance but the fee will be paid later. The different of both is in early payment fee the price will be less expensive then the credit fee.

5. The Proof of Benefits (Dalil Maslahat)
Transaction by credit system is benefit for both the seller and the buyer. The buyer will be benefited by gradually paying the money with a fixed period and the seller will be benefited by increasing the price, this kind of transaction does not contradict in Shariah (Islamic Law), because it is based for the benefits of ummah.

Syaikh Bin Baz agrees with this kind of transaction, in which both seller and buyer are having benefits, both of them like it and no one is loss. (Ahkamul Ba'i, Syaikh Jarulloh, page. 58).

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Tuesday, December 08, 2009

Indonesia - why there is no recession in the world's leading Muslim economy

Following the election of US President-elect Barack Obama there is likely to be a slow recovery in confidence in the United States financial and banking system. A recession is unavoidable in the US and EU, but with only a downturn in developing countries. This crisis of confidence in the Western banking and financial system comes during the dying days of the most unpopular American presidency in living memory. Financial mismanagement and weak regulatory frameworks have devastated the US economy, making the rich richer and the poor poorer. Two million Americans may lose their homes. Millions in the US and Europe will lose their jobs.

Yet the devastating legacy of the Bush presidency leaves open great opportunities for Indonesia, the Muslim world and the developing countries of the South.

Indonesia can play a key role in leading the Muslim world toward economic recovery, and help minimize the impact of global recession.

First, by managing its national economy to maintain growth, demand, imports and exports. The nominal Gross Domestic Product for 2009 is projected at $547 billion. Indonesia is already in the top 20 economies of the world.

Indonesia is currently overtaking Belgium and Sweden. It will soon overtake Turkey, the Netherlands and Austria as it enormous size, resources and population come into play. It is a strong candidate to join the top 10 economies in the world within two decades.

Second, by mobilizing investment for oil, gas, energy projects, biofuels, infrastructure (roads, railways, ports), manufacturing and retailing sectors. It needs over $40 billion for electricity alone, to finance an additional 40,000 MWe of power by 2025. Indonesia will become a nuclear power, and plans four power stations. Total foreign investment needed overall during the next 15 years exceeds $100 billion.

Investment is still coming from the US and EU (including Eastern Europe) but increasingly from the BRICs (Brazil, Russia, India and China), and also from Asia-Pacific Economic Cooperation countries like Canada, Japan, Korea, Taiwan, and from Association of Southeast Asian Nations member states (including Brunei, Malaysia, Philippines, Singapore, Thailand). Investment is also coming in greater volume from the Gulf Arab states, Israel and South Africa.

Third, Indonesia can help lead Muslim economies by using its economic size and prestige as a member of the United Nations Security Council to join Brazil, Russia, India, China and Southern countries to bring about changes in policies and in the balance of power in world organizations dealing with trade, finance and development, especially the World Bank, the International Monetary Fund (IMF) and World Trade Organization (WTO).

Indonesia has major reservations about the IMF following its own experience in 1998. German Finance Minister Peer Steinbrueck said that the world should not slip into creating a shadow world economic government run by an inner IMF council. Indonesia is also tired of being kept on the fringes in the WTO.

Asia and Southern countries want a new deal. Muslim countries collectively represent an increasingly important source of capital, while Western liquidity has partly dried up. Muslim economies represent important investment sources as well as investment destinations. The collective size of Muslim economies represents significant demand for Western goods and services, relatively unaffected by the recession in the West.

Indonesia can still deploy export credits, sovereign funds, Islamic finance and other non-traditional financial sources, such as environmental funds and carbon credits. Despite the global downturn Indonesia is still pulling in some bank finance.

A $140 million syndicated loan for Excelcomindo for telecommunications expansion was announced recently. Low-cost airline Lion Air is buying 12 Boeing 737 planes even though the required local cash contribution for the last four has risen to 30 percent. Lion Air will use its own cash to carry on expanding. St. Miguel Corp. of the Philippines is competing with a US-led consortium to clinch a $1.3 billion coal supply deal, to buy PT Bumi Resources from Bakri Brothers. There is money here and money coming in.

Standard and Poors is holding Indonesian credit ratings stable and its credit rating may even be raised. Singapore could slip into recession but Indonesia will not, and the reason is mostly sheer size plus improved financial and economic management.

Indonesia is in a key position as the largest Muslim country in the world with a population of 230 million and a land area of 1.9 million square kilometers.

The Indonesian Gross Domestic Product was $843.7 billion in terms of purchasing power and $432.9 billion in terms of official exchange rates in 2007. It has fixed foreign investment of $57.6 billion and holds $9 billion of investment in other countries. It has more than 3,500 millionaires holding over $100 million each, of whom 70 percent live in Jakarta.

Its current economic growth is 6.5 percent and may fall below 6 percent in 2009 due to reduced exports. Government will stimulate growth using the national budget which already reached $100 billion in 2008. Government is confident it can hold growth at 6 percent. The World Bank has set aside a $2 billion standby loan for 2009 only to be triggered if growth falls below 5.8 percent.

In 2007 Indonesian exports were $118 billion and imports $86 billion, a trade surplus of $32 billion, and foreign exchange reserves as of this month were $50 billion.

Indonesia has already lost some jobs in sectors like textiles. Some exports to the US and Europe fell in the fourth quarter. The stock market, government bonds and the national currency also fell in value during the global financial crash in the first week of October.

The government launched a securities buy-back program spearheaded by state-owned enterprises and defended the rupiah currency by intervening in the currency market via the Bank of Indonesia. The government also took steps to increase liquidity and focused on getting inflation under control and on maintaining growth.

The government has increased guarantees on personal deposits to 2 billion rupiahs ($190,000), which covers 100 percent of deposits for over 99.7 percent of 81 million bank accounts.

Indonesian banks are strong, with adequate reserves, low non-performing loans and almost no exposure to subprime losses. Only a small group of investors lost money on Lehman-related instruments purchased via international banks.

The Indonesian inflation rate is declining from a high of 12 percent to maybe 9 percent by January with reductions planned to between 9 percent and 7 percent for the rest of 2009. The bank rate is being stabilized at 9.5 percent after six months of consecutive rises. It will be held for a while and then reduced to 7.5 percent in 2009.

Indonesian bonds are recovering from their recent nose-dive and the stock market is stabilizing. Local economists say the stock market was over-valued and more normal values and returns will be restored as part of the local share trading cycle.

The government is now focusing on trying to mobilize its massive $115 billion dollar national budget for 2009, up from $100 billion in 2008, to push projects and overall spending forward and help substitute local demand for declines in exports, with every hope of keeping economic growth for 2009 at between 5.5 and 6.0 percent.

Despite the collapse of the Bank of Indonesia subsidiary Indover Bank in the Netherlands, there is no sovereign default. Indonesian Finance Minister Sri Mulyani Indrawati and the new central bank governor, Boediono, have taken a stand against previous mismanagement.

In contrast to the kid-glove treatment of failed bankers and financial managers in the West, who took imprudent and possibly illegal risks, the Indonesian government is directing the work of its Corruption Eradication Commission and Corruption Court against corrupt central bankers and parliamentarians who took bribes.

The Indonesian government also says it will pursue legally those who misused its name and dragged it into the Indover collapse, by implying there were sovereign guarantees backing Indover borrowing when there were none. It also intends to pursue allegations of short trading and fraudulent practices in the stock exchange.

Indonesia lost 10 years as a result of the 1998 banking crash when it put its fate in the hands of the IMF, which initially failed to understand local strengths and exaggerated local weaknesses. An historical photo shows President Suharto sitting at his desk, signing his own political death-warrant while the IMF representative stood over him, as he signed the IMF agreement.

A lot has changed between the Asian banking crash of 1998 and the Wall Street crash of 2008. The economic balance of power in the world has changed and the balance of global power has shifted to the South and East. British Prime Minister Gordon Brown recognized this when he urged the Gulf states and the G20 to help stabilize the world economy.

In the 1998 bank crash Indonesia had no freedom and no choice. This time in 2008 Indonesia has freedom and is stronger, and can chose to tread its own path. Hopefully its greater strength and determination will inspire Muslim and Southern countries not to panic in the face of recession in the West, but to work together to avoid the spread of recession to the South and to build and strengthen a new world economic order.

Terry Lacey is a development economist who writes from Jakarta, Indonesia, on modernization in the Muslim world, investment and trade relations with the European Union and Islamic banking. This article is published with permission from the author.

Source: The Daily Star
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Thursday, December 03, 2009

Prayer (Salat) Idul Adha in Mecca

Idul Adha mubarak to all Muslim all over the world, the video below showing the prayer or salat of Idul adha in Makkah, where the hajis (pilgrimage) do worship to Allah together leaving their attributes their positions and their castes, all of them are the same in the eye of Allah.




سبحان الله والحمد لله و لا إله إلاالله والله أكبر
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