Madinat al-Muslimeen Islamic Message Board
|02/17/01 at 20:18:57|
I have some idea about what Islam says about Riba. But, I am looking
for firm guidance and reference to the quran. If possible, please tell
me the surah, ayah and the explanation. Also, how (if any) it makes a
difference by living in an American Society.
|02/17/01 at 23:52:35|
This is from the Quran.
2:275 (Surah al-Baqarah)
Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say: "Trade is like usury," but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever).
Allah will deprive usury of all blessing, but will give increase for deeds of charity: For He loveth not creatures ungrateful and wicked.
3:130 (Surah al-e-Imran)
O ye who believe! Devour not usury, doubled and multiplied; but fear Allah; that ye may (really) prosper.
30:39 (Surah ar-Rum)
That which ye lay out for increase (usury) through the property of (other) people, will have no increase with Allah: but that which ye lay out for charity, seeking the Countenance of Allah, (will increase): it is these who will get a recompense multiplied.
|02/20/01 at 12:12:16|
Many thanks for ur reply. I definately get a better picture about Riba now. My next question to you is,
In terms of investment, what is permissible?? In particular, I have a question, why can Muslims invest in the stock market, but cannot invest in bonds, or mutual funds that have a bond component??
Lastly, some people argue that investing in the stock market (maybe on a short term basis) is similar to gambling. If this is the case, why is such trading allowed whereas gambling is not??
Please reply soon.
|02/20/01 at 12:20:08|
Welcome to the board :) Post an introduction in the Bebzi stand!!
The topic of stocks and investments was discussed before as well check out [url=http://www.jannah.org/cgi-bin/yabb/YaBB.pl/YaBB.pl?board=madrasa&action=display&num=740] this thread [/url] and [url=http://www.jannah.org/cgi-bin/yabb/YaBB.pl/YaBB.pl?board=madrasa&action=display&num=398] this thread. [/url]
|02/20/01 at 13:06:30|
|thanks "Jannah" for ur reply....i did look at the answers posted in other threads....while many of my questions were answered....i did not receive an authentic answer to the difference between investing in stock market (lets say day trading for now or investing on a short term basis) vs. gambling?? my non-muslim friends are asking me this question and I cannot answer....it is quite shameful in my opinion...|
Anyone, please take ur time to reply, but I would like to educate myself and my friends on this subject.
|02/20/01 at 16:58:02|
|Asalaamu Alaikum ;-)|
Coincidentally I asked a brother a similar question the other day.
He knew a brother who had undertaken a T+20 trade where you have 20 days to settle after transacting to buy some shares. Given the long settlement period though, you can sell the shares before you have to buy them and hence pocket the difference.
Sounded doubtful to me but would have been nice to have some firm arguments.
Where's Br HiMY? Isn't he our resident Economist?
Welcome to the board Brother ;-)
|02/20/01 at 20:49:26|
Well when you are gambling it's based on pure chance or luck. With common stocks you are actually taking your money and buying part of a company. You own part of that company now and based upon how it does business your shares in that company and increase or decrease.
Check out this URL. [url]http://islamic-finance.net/elief.html[/url] This one I gave before, but changed to a different page. This place has tons of different articles on Islamic economics and banking.
This one should be especially of interest (no pun intended ;)) [url]http://islamic-finance.net/research/speculation-forum.html[/url]
Speculation and Gambling
(Source: Islamic Banking and Finance Net Listserver)
Adnan Ally Mamode Jaumdally <M950336@UBD.EDU.BN>
According to Zaman (1986), "Muslims are encouraged to seek economic bounties which God has made available to them." From the above it is evident that Muslims are increasingly interested in investing in halal securities traded in stock markets all around the world in order to earn the economic benefits. However, one needs to predict the future value of a stock prior to making any decision either to buy or to sell the asset. Hence, there is a great deal of speculation involved in stock markets. This has raised the issue, in the Islamic arena, of whether speculation in the stock markets is gambling and thus forbidden. The Quran clearly prohibit us from gambling as illustrated by the following verses relating to games of chance or gambling, referred to in Arabic as maysir;
Allah SWT says;
"They will ask thee about intoxicants and games of chance. Say: In both there is great evil as well as some benefit for man; but the evil which they cause is greater than the benefit which they bring." Quran (2: 219)
"By means of intoxicants and games of chance Satan seeks only to sow enmity and hatred among you, and to turn you away from the remembrance of God and from prayer. Will you not, then, desist?" Quran (5:90)
The Messenger of Allah (SAW) also forbade us from gambling as illustrated in the following Hadith;
From Abu Hurayrah (RA), that he said, "The Messenger of God (S) forbade the 'sale of the pebble' [hasah] [sale of an object chosen or determined by the throwing of a pebble], and the sale of al-gharar. [Sahih Muslim]
Ibn Taymiyah (ra, nd) expounds on the above Hadith to explain gharar as the consequence of which is unknown and goes further to claim that selling it involves maysir, which is gambling. Maysir or gambling is prohibited in Islam because it causes enmity and hatred and also involves consuming property bi-al-batil, which is a type of oppression. Being given the obvious prohibition of gambling in both the Quran and the Hadith of the Prophet (SAW), it is of utmost importance to determine whether speculation in the stock market is similar to gambling.
Several scholars have addressed this issue, from different angles. Kamali (1996) defines speculation as consisting of "the intelligent and rational forecasting of future price trends on the basis of evidence and knowledge of past and present conditions". Based on the Quranic verses and the Hadith of the Prophet (SAW), Ibn Taymiyah (ra) pointed out that if a sale contains gharar and devours the property of others, it is the same as gambling, which is clearly forbidden. Therefore, for a transaction to be equated to gambling, it must involve the devouring and unlawful appropriation of the property of others. Against this backdrop, speculative risk taking in commerce, which involves the investment of assets, skills and labor is not similar to gambling. This is because the buyer is engaged in a transaction aimed at making profit through trading and not through dishonest appropriation of the property of others.
Maysir has also been described as involving two parties in a combative game played for the sole purpose of winning at the expense of one's opponent. The gain accruing from such a game is unlawful, as is the act of playing it, for it diverts one's attention from productive occupation and virtuous conduct. Applying this definition to commercial speculation on stocks, it can be said that speculation does not necessarily involve a combative game played in order to beat an opponent or to acquire his/her property. However, the speculative risk undertaken is more closely associated to commercial risk taking for profit rather than gambling.
El-Ashkar (1995) also addresses the same issue. He defines speculation as "the practice of (a) using available information to (b) anticipate future price movements of securities so that (c) an action of buying or selling securities may be taken with a view to (d) buying or selling securities in order to (e) realize capital gains and/or maximize the capitalized value of security-holdings." From this point of view El-Ashkar argues that the decision taken in speculation is not result of the turn of a card or casting of a dice. However, it is a process that relies on the analysis of a lot of economic and financial data, companies' financial reports, political decisions, information about management skill and aptitude and the personal profile of the decision makers. That is to say, speculation is an activity that requires a great deal of knowledge and skills. Therefore, speculation in stock markets cannot be equated to gambling.
The above description of El-Ashkar relies on the availability of information to differentiate speculation from gambling. It seems that the absence of information or even the lack of it may mean that speculation may become very close to gambling. However, this is not necessarily so as it would mean that all other decisions made with lack of information, not related to stock markets, will be gambling. Hence, the lack of information should not be confined to speculation only.
The sale of gharar is said to lead to maysir (gambling) which leads to oppression and is therefore prohibited in Islam. It is evident that gharar is not present in speculation in stock markets as each party is clear to the quantity, specification, price, time and place of delivery of the object. Moreover, the object of the transaction, which is the purchased security, is available in the market at the time of transaction and is, bound to be available at the time of delivery. Therefore, speculation has no element of gharar and, hence, does not lead to maysir.
The above discussion has proved that although speculation in the stock markets may look like gambling, yet it is by no means akin to gambling. Speculation has both pros and cons. Its positive side is that it can help stabilize prices and activate a market where there is thin trading. It can also provide signals to less-informed investors upon which to act. The negative effect of speculation is that excessive amount of it may cause volatile price movements in the market. It can thus be concluded that excessive speculation should not be allowed, but a reasonable degree of it be permitted. Quantitative limits on daily trading volume and legislative guidelines may help contain speculation within healthy bounds.
El-Ashkar, A. AF, (1995), Towards an Islamic Stock Exchange in a Transition Stage, Islamic Economic Studies 3(1), pp. 79-114.
Ibn Taymiyah, (n.d.), Al-Qawaid Al-Nuraniya Al-Fiqhiya (The Second General Rule: Prohibited and Permitted Contracts), pp. 112-133.
_________, Nazariyya Al-'Aqd (On the Sale of Something for its Value or at the Established Price or by its Number), pp. 220-229.
Kamali, M. H., (1996), Islamic Commercial Law: An Analysis of Futures, American Journal of Islamic Social Sciences 13(2), pp. 197-224.
Zaman, M. R., (1986), The Operation of the Modern Financial Markets for Stocks and Bonds and its Relevance to an Islamic Economy, American Journal of Islamic Social Sciences 3(1), pp. 133
|02/20/01 at 22:27:01|
Looks pretty cool Jannah, I'll insha'Allah check it out when I have a little more time.
It was mentioned in another discussion that one of the organizations that invests in the stock market have some sort of 5% riba rule, that they purify their income and give it to charity. Do you guys know what I'm talking about? There was a lengthy discussion about this on another discussion list I am on (I haven't gone through what was said there yet) but maybe someone has some information about this? I think it was Amana trust, I forgot now, its the one where Chief Justice Taqi Usmani is an advisor.
|02/20/01 at 23:53:42|
Trading in common stocks of companies that don't primarily deal in haraam is okay. I am not so sure about day trading though. That may be like gambling. I dunno. Over a longer period, there is less element of chance.
BTW, if you are invested in the high tech market your portofolio probably #@*(%#! these days. :)
|02/21/01 at 05:55:23|
|Asalaamu Alaikum ;-)|
[quote]With common stocks you are actually taking your money and buying part of a company. You own part of that company now and based upon how it does business your shares in that company and increase or decrease.
See that's the thing with long settlement periods, you never end up having to buy the share hence you never own part of the company
Jazakallah Khair for the links
[quote]BTW, if you are invested in the high tech market your portofolio probably #@*(%#! these days. [/quote]
Are those burnt fingers I see? :D
|02/23/01 at 21:39:38|
Whats the situation with the goodwill of a company? i heard that some people leave some furniture behind and charge the goodwill to that
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