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I got your comments on our group's evaluation of Islamic banks and Mudaraba companies. The MBA project we are doing is in the second week of June, 1997. Your guidance would help us in presenting the true picture of an Islamic Financial Institution (IFI) at LUMS. It would be quite helpful if you answer following questions:
Q: 1-
(1) Why cannot currencies be sold at rates different than the market or spot rate? How are currencies of different countries different than ordinary goods which can be sold at prices different than the market?

(2) Why is discounting of bills of exchange in different currencies permitted when currency itself cannot be traded below the spot rate?

(3) Can one party in a 'promise to sell/ purchase' agreement ask for a security whether cash or any kind of collateral, from the other party?

(4) How can an agent's (agent being the bank) fee be determined if he is made responsible to collect the amount written on bill of exchange on behalf of its client? Wouldn't such kind of agency fee or service charge become an excuse for charging interest? How can one prevent it?

(5) Is it injustice if two or more partners agree on a ratio of profit, not the loss, which is different than the ratio of capital contributed by each partner?

(6) Are the following rules correct according to Sharjah:

a. Is it permissible for the lessee to let to a third party during the lease period whether for the same rental or more, as long as the asset is not affected by the change of user?

b. Is it permissible to stipulate in a contract of Istisna that price would be reduced by a specific amount per day upon delay in delivery by the seller?

(7) What steps can an Islamic Financial Institution take to prevent the concentration of wealth among the rich individuals of a Muslim society?

A: Here are the answer to your recent questions:

(1) If the currencies are of the same country, they cannot be sold at a rate different from their face value. However, if the currencies are of different countries, they can be sold on spot at whatever rate agreed upon between the parties which can be different from the market rate. However, if the payment is deferred on either side, it must be in accordance with the market rate. This condition is put to restrict the use of this transaction to the genuine needs, otherwise it may be taken as a device to effect riba transaction. The details of the rules regarding the transaction of currencies are available in my Arabic book Akham Al-Auraq Al - Naqdia which has also been translated.

(2) The discounting of bills of exchange even in different currencies is not permitted in Shari'ah. The reason is that a Bill of Exchange stands for the amount of the bill which is a debt payable by a seller. If it is sold or purchased for cash, it means that two currencies are being exchanged where the payment at one side is deferred and I have already mentioned in answer to question No.1 that if the payment is deferred on either side, the price should not be different from the market spot rate.

(3) The promise to sell/purchase is merely a promise. It does not effect the contract of sale itself, therefore, no rights or obligations of a sale can arise out of a promise only. Hence no party can ask for security or a collateral for the fulfilment of a promise. Because the security or collateral is justified only where a liability or a debt has actually come into existence while in the case of promise no debt or liability is created. It is only an undertaking to sell/purchase a commodity in future. When the actual sale occurs on a deferred payment basis the debt will be created and at that time it will be justified to ask for a security.

(4) If the bank has been made an agent to collect the amount of a Bill of Exchange on behalf of its client it is permissible for the bank to charge a fee for this service. The fee may be determined by the parties on whatever basis they agree upon. However, it should not be tied up with the period of the maturity of the bill. With this condition this transaction will not, hopefully be instrumental to charge interest.

(5) In a Musharakah contract the parties may agree on a ratio of profit different from the ratio of their investment with the only condition that a partner who in expressed terms, relieves himself from the liability to work for the partnership cannot claim a ratio of profit higher than the ratio of his investment, for example, if `A' has invested 60% of the capital while 'B' has invested 40% the parties can agree that 'B' will get 60% of the profit and 'A' will get 40% of the profit. However, if 'B' has, in expressed terms, put a condition in the contract of Musharakah that he will never work for the enterprise, he cannot claim more than 40% of the profit.

(6.a) A lessee can sub-lease the property to a third party with the permission of the lessor, if the rent charged by him from the sub-lessee is equal to the rent payable by him to the original lessor. This sub-lease is permitted with the consensus of all Muslim jurists. However, if the lessee charges from his sub-lessee a rent more than the rent payable by him to the original lessor, it is not permissible according to Imam Abu Hanifah, but it is permissible according to other Imams.

(6.b) It is permissible to stipulate in a contract of Istisna that price would be reduced by a specific amount per day upon delay in delivery by the seller. The contemporary scholars of Islamic Jurisprudence have allowed this type of contract on the basis of the following ruling given by the classic Fuqaha:

(7) In fact the answer to this question requires a detailed treatise, but without going into details the following steps may be taken by the Islamic Financial Institutions to prevent the concentration of wealth among the rich of its society:

Firstly, they should maximise the use of Musharakah and Mudaraba instead of Murabahah or Leasing, because the real alternative to interest in a true Islamic economy is Musharakah and Mudaraba which paves the way for equal distribution of income. among the members of the society and they are very competent and strong instrument diverting the flow of wealth from a few rich people to the common lot. Secondly, they should find out ways and means to finance the small scale trade and industry. For this purpose an Islamic financial institution should rise above the level of pure commercial and material benefits and should set their priorities in wider interests of the society of which they, themselves, are an inseparable part.'

Contemporary fatawaa



Q: 8- The question arises as to whether the use of the loop, which is inserted in the uterus of the woman, is permitted as a means of birth control. The effect of the use of the loop is summarised in the letter of Dr A E Suliman, an experienced and qualified gynecologist.

In some cases, the sperm and ovum are destroyed prior to fertilization. In other cases, fertilization takes place but the resultant fertilized ovum which takes the form of cellular material is prevented from becoming implanted in the inner wall of the uterus at the time of such expulsion of the fertilized ovum.

Mufti Jaleel Qasmi Sahib has expressed the view that the use of the loop in such circumstances is permissible although not encouraged, such view being based on the analogy of AZAL. A general medical practitioner has raised an objection to the effect that the cellular material which is so expelled contains life but then, in answer the sperm and the infertilized ovum also contains life. Your considered FATWA on the matter would be greatly appreciated as soon as possible, and is required by the Jamiatul Ulema, Natal. (M S. Omar, South Africa)

A: It appears from your question as well as the enclosed explanation given by the expert that the use of the loop may bring either of the two results:

1. It may prevent fertilization by destroying the sperm and the ovum prior to their interaction.

2. If the fertilization takes place, the fertilized ovum is expelled from the uterus by the loop. This expulsion takes place within one or two weeks after the fertilization.

In the first case where the loops acts as a preventive measure against fertilization. It is similar to any other contraceptive and the rules regarding `AZAL' (coitus interruptus) may be applied to the loop also, i.e. its use is permissible in Shariah in cases of individual needs, like the sickness or the weakness of the woman where pregnancy may endanger her health.

In the second case, however, the rules of AZAL' cannot be applied, because in that case it is not merely a preventive measure, but it expels the fertilized ovum from the uterus after conception. Therefore, it acts as a device to effect an abortion. Hence, the rules of abortion shall apply.

According to the Islamic rules, an abortion is totally prohibited, if it is effected after the completion of 12 weeks' after conception. But at an earlier stage, abortion is permissible only for medical reasons and other genuine needs.

As the loop expels the fertilized ovum within two weeks, its use cannot be held as prohibited totally. However being a device of abortion, its use is not advisable and it should be restricted to the cases of the real medical needs only.

Contemporary fatawaa



Q:6- A lives in the United States of America. He wants to marry B, a girl living in Karachi. A, for a number of reasons, cannot come to Karachi to marry her, nor B can go to U.S. unless she is proved to be the wife of A. How can A and B contract a valid marriage without meeting each other? Is it permissible for them under Shariah to contract marriage on telephone by pronouncing offer and acceptance?

A: Nikah (marriage) cannot take place on telephone, A Nikah because it is a necessary condition for a valid contract of marriage that at least two witnesses should be present at the time of marriage and should witness both offer and acceptance. This necessary condition cannot be fulfilled in a telephone conversation.

However, if A wants to marry B without both being present at one place, he can authorize any one of his friends or relatives living in Karachi to contract his marriage and appoint him his agent to pronounce offer or acceptance on his behalf. If, for example he selects C to be his agent for this purpose, he should authorize him in the following words:

"I authorize you to contract my marriage with B, daughter of D, on a sum of....as dower".

Then, at the time of marriage ceremony in presence of at least two male witnesses, the girl may pronounce her offer saying, "I married A, son of E on a sum of.... as dower". If there is a Qadi or a Nikah Khwan duly authorized by the girl, he can also pronounce offer in the following words:

"I gave B, daughter of D in marriage with A on the sum of.... as dower"

C, the agent of A, will say in reply, "I accepted this marriage on behalf of A."

The offer can also be initiated by C as an agent of A. In this case he will address B in the following words:

"Being a duly authorized agent of A, I marry A, son of C, to you on a sum of.... as dower"

In this case B will reply, '7 accepted this marriage."

In both cases, it will be a valid contract between A and B, whereafter they will be treated as husband and wife duly wedded to each other according to Shariah.

Contemporary fatawaa



Q: 7- "Some people insist that a Muslim, while selecting a woman for marriage should not pay any attention to her physical or facial appearance. He should only see whether she is a religious woman or not.

In this respect a Hadith is often referred to, wherein the Holy Prophet saw. is reported to have said,

"A woman is married either for her beauty or for her wealth or for her religious behavior. So you must try to choose the woman committed to her religion."

They argue that the considerations of beauty and wealth have been condemned in this Hadith, while the consideration of religion has been confirmed and stressed upon.

Please explain whether this Hadith is authentic and whether the above mentioned point of view is correct according to this Hadith.

A: The Hadith is authentic, but it does not mean that, when deciding to marry a woman, her physical appearance cannot be taken into consideration at all. The purpose of the Hadith is that it should not be the sole consideration.

Instead, her religious attitude should be given due importance. If a woman is very attractive in her appearance, but she does not care for her religious obligations or has a rebellious attitude towards them, she should not be preferred to a less attractive woman whose commitment to Islam is evident and who observes her religious obligations with sincerity and devotion.

However, if there are two women, both equally committed to Islam and equally observing the imperatives of Shariah, then, there is no bar on a Muslim if he prefers a woman who seems iv him more attractive than the other.

In fact, one of the basic objectives of marriage, according to Islamic teachings, is that the spouses may run a chaste life and may fulfil their sexual needs with as much satisfaction as may help them refrain from indulging in an unlawful activity. This objective cannot be achieved unless they like each other, both in their appearance and in their inner qualities. That is why the spouses have been advised to see each other before entering into the pledge of marriage. The Holy Prophet saw not only allowed one to see the woman whom he wants to marry but emphatically recommended it for the Muslims. One of his blessed companions once told him that he had resolved to marry a woman from the Ansar. The Holy Prophets asked him if he had seen that woman. When the person replied in the negative, the Holy Prophet S said to him: "See her, it will help create a better union between you". (Tirmidhi)

It is obvious that merely seeing a woman cannot reveal anything about her except physical appearance. It is, therefore, evident that the appearance of a woman can be a valid consideration when deciding to marry her. Had it been prohibited to marry a woman for her beauty (of course, in addition to her inner qualities), it would have been pointless to see her before marriage.

The correct position, therefore, is that the appearance of a woman is one of the valid considerations which may be kept in mind when deciding to marry her. But it should not be the only consideration, nor should it be.

Contemporary fatawaa



Q:5- "In the secular legal system, adoption of a child by couples is lawful as we all know. Please elucidate the position of Shariah in this regard. How far such an adoption is permissible in Islam, and if so, what are the rights and obligations of the parties involved in such a situation?" (Yousuf Ghani, New York)

A: Adoption of a child has no legal effect in Shariah. One can adopt a child for his emotional and psychological satisfaction. He can treat him as his own son in the matters of love, affection and general behavior. Adoption of a child to provide shelter to him is a virtuous deed which carries much reward in the Hereafter. But so far as the legal aspects are concerned, adoption has no consequence. The child should not be attributed except to the natural father, and not to the one who has adopted him. Even in the matter of hijab adoption has no effect whatsoever If a male child is adopted by a woman, she will observe hijab from him after he reaches the age of puberty, unless she is related to him in a prohibited degree. An adopted child can marry a daughter of his adoptive parents, because she is not his real sister. In short, adoption does not create a new legal relationship which did not exist before.

All these rules are inferred from the principle laid down by the Holy Qur'an in this respect. The people in jahiliyyah used to treat an adopted child as the real one in all respects. The Holy Qur'an condemned this practice and the following verses were revealed:

"And Allah did not make your adopted children your sons. That is only your words coining out from your tongues. And Allah says the truth and He guides you to the right path. Call them with reference to their (real) fathers. It is more just in the sight of Allah." (Surah 33: V4)

However, it should be remembered that although an adopted child cannot inherit from his adoptive father, but it is permissible, rather advisable, for him that he, in his lifetime, makes a will in favour of his adopted son. Through such a will he can bequeath upto one third of his property to his adopted child who cannot otherwise share his inheritance.'

Contemporary fatawaa


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