192 Ahmad Block, New Garden Town, Lahore - Pakistan.
Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056
Email: info@alhudacibe.com
www.alhudacibe.com
Two Days Specialized Training Workshop On Islamic
Microfinance
16th & 17th September, 2012 Sana’a, Yemen
Shariah Foundation and Applications of
Islamic Microfinance
Rulings In Islam
These 5 primary objectives follow by Shariah can be
observed though the Al Ahkam (rulings) upon which
Fiqh (Islamic Jurisprudence) rotate around. The
rulings are categorized as follows:
 a. Wajib (obligatory)
 e. Haram (unlawful)
 b. Mustahab (recommended) (Sunnat)
 c. Mubah (permissible)
 d. Makruh (disliked)

Rulings





Wajib- An obligatory action or something that shall be
performed. Anyone who leave it is liable to gain the punishment
of Allah s.w.t. in the Here after as well as a legal punishment in
this world.
Haram- An unlawful action or the one that shall not be
performed and is strictly prohibited. Anyone who engages in it
is liable to gain the punishment of Allah s.w.t. in the Here after
as well as a legal punishment in this world.
Mustahab- A recommended action or something that should be
performed.
Mubah- A permissible action or something that is neither
encouraged nor discouraged.
Makruh- A disliked action or something which is abominable
and should be avoided but not in strictly prohibitory terms.
Islam and Shariah
Islam
Aqidah
(Faith & Belief)
IBADAT
(Man to God Worship)
Political Activities
Shariah
(Practices & Activities)
Akhlaq
(Morality & Ethics)
Muamalat
(Man to Man Activities)
Economic Activities
Islamic Financial Activities
Social Activities
Human Financial Needs
Fulfillment of Financial Needs
Own Capital
Others’ Capital
Equity Financing
Debt Financing
Some Very Important Shariah
Principle About Islamic Finance





Money is not an asset by itself and can increase in value only if it
joins other resources to undertake productive activity.
Fund providers must share the business risk.
Assets must back the transactions and investments may be made
only in real, durable assets.
Islamic funds cannot finance activities deemed inconsistence with
Shariah such as, business related to alcohol, gambling, any sort of
trading of pork etc.
Islamic finance contracts required for mutual agreement and
stipulates exact terms and conditions.
Tools of Islamic Microfinance







Charity
Islamic jurists have unanimously held the view that it is the
collective obligation (fard kifayah) of a Muslim society to take
care of the basic needs of the poor.
Charity occupies a central position in the Islamic scheme of
poverty alleviation.
When compulsorily mandated on an eligible Muslim, sadaqa is
called zakah.
Zakah is the third among five pillars of Islam and payment of
zakah is an obligation on the wealth of every Muslim based on
clear-cut criteria.
These funds are meant mostly for the extremely poor and function
as a safety net for meeting their immediate and basic needs
In flow of benefits that are expected to be stable and permanent
(such as, through endowment of a physical property), it is called
sadaqa jariya or waqf.
Economic Empowerment
Islam strongly encourages charity from the giver’s
point of view, it seeks to minimize dependence on
charity from the beneficiary’s point of view.
 A man of the Ansar community came to the Prophet
(peace be upon
 him) and begged from him. (#1)
 He (the Prophet) asked: Have you nothing in your
house? He (the man) replied: Yes, a piece of cloth,
which we wear, or which we spread (on the ground),
and a wooden bowl from which we drink water. (#2)

Economic Empowerment






He (the Prophet) said: Bring them to me. He (the man) then brought these articles to him
and he (the Prophet) took them in his hands and asked to the assembly of people: Who will
buy these? A man said: I shall buy them for one dirham. He (the Prophet) asked twice or
thrice: Who will offer more than one dirham? Another man said: I shall buy them for two
dirhams. (#3)
He (the Prophet) gave these to him and took the two dirhams and, giving them to the man of
the Ansar, he said: Buy food with one of them and hand it to your family, and buy an axe
and bring it to me. (#4)
He then brought it to him. The Prophet (peace be upon him) fixed a handle on it with his
own hands (#5) and said: Go, gather firewood and sell it, and do not let me see you for a
fortnight. (#6)
The man went away and gathered firewood and sold it. When he had earned ten dirhams, he
came to him and bought a garment with some of them and food with the others. (#7)
The Prophet (peace be upon him) then said: This is better for you than that begging should
come as a spot on your face on the Day of Judgment.
Begging is right only for three people: one who is in grinding poverty, one who is seriously
in debt, or one who is responsible for compensation and finds it difficult to pay. (#8)
External (Equity & Debt) Financing
Equity Financing
Debt Financing
Uqud al-Ishtirak
(Contracts of Profit Sharing )
Uqud al-Muawadhat
(Deferred Contracts of Exchange)
Al-Mudarabah
(Trustee Profit Sharing)
Al-Bai’ Bithaman (Mu)Ajil (Deferred
Installment Sale)
Al-Musharakah (Joint Venture Bai’ al-Murabaha
Profit Sharing)
(Cost Plus Profit Sale)
Others
Al-Ijarah (Leasing)
Bai’ al-Salam (Commodity Sale)
Bai’ al-Istisna’ (Sale on Order)
Equity Market
Debt Market
Why Islamic Finance?
 The
body which is promoted by Hiram sources is
bound to hellfire.
 On the Day of Judgment, a person will not be
moved from the place where he stand until he is
asked about the sources of his income and they
way he spent it.
 Purifying of the needs of life (food, drink, clothes
house etc) is one of the most important reason for
the acceptance of prayers by Allah.
Main Objective of Islamic Finance
The main objective of an Islamic finance is to
clean the income of Muslims from Muhurramat.
Most Important Islamic Teaching Related
To Business
1.
2.
3.
4.
5.
6.
7.
8.
9.
Elimination of Interest (Raba)
The prohibition of uncertainty (Gharar)
The prohibition of Gambling (Qimar)
The precipitation of games of chance (Maser)
Honesty and Fair Trade (Ghishsh and Khilabah)
Spending in the Good Cause
Buy Back
Two Mutually Conditional Contract
Entitlement to profit depends on liability for risk
Interest

Interest, Usury, or Riba is forbidden in almost all
major religions of the world e.g.

Judaism

Christianity

Islam
Riba in Quran

God has permitted trade and forbidden interest….”
(The Cow – Sura Al-Baqara 2:275)
O
believers, fear Allah, and give up what is still due
to your from the interest (usury), IF [indeed] you
are true believers[!!!]. If you do not do so, then
take
Notice of War from Allah and his Messenger.

But, if you repent, you can have your principal.
Neither should you commit injustice, nor should you be
subjected to it.”
(The Cow – Sura Al-Baqara 2:278-9)
Riba in Quran (Related in context to 2:278)
The only reward of those Who make War upon Allah & his Messenger, and strive
after corruption in the land, will be that they will be
1.
Killed
2.
Or, Crucified,
3.
Or, have their Hands and Feet on alternate sides Cutoff,
4.
Or, will be Expelled out of the land.

Such will be their degradation in the world, and

in the hereafter, theirs will be an terrible doom.”
(Quran: The Table Spread - Al-Maida Chapter 5: Verse 33)
Riba in Hadith
The Prophet cursed
 the
receiver and
 the
payer of interest,
 the
one who records it and
 the
witnesses to the transaction
 and
said: “They are all alike (in guilt).”
(Sources: Jabir Ibn Abdullah, Muslim, Tirmidhi, Musnad Ahmed
Riba in Hadith
The Prophet said: “Riba has seventy
segments, the least serious being equivalent
to a man committing adultery with his own
mother.”
(Sources:
Majah)
Aby
Hurayrah,
Ibn
RIBA
RIBA
Riba-Al-Fadl
Riba-Al-Nasiyah
Sarfi Sood
Tijarti Sood
Simple Sood
Simple Sood
Compound Sood
Compound Sood
The prohibition of uncertainty (Gharar)
 There
are strict rules in Islamic finance against
transactions that are highly uncertain or may cause
any injustice or dishonesty against any of the
parties.
 The concept of Gharar has been broadly defined
by the scholars in two ways.
 First, Gharar implies uncertainty.
 Second, it implies dishonesty.
Classical Examples of Gharar
Selling goods that the seller is unable to deliver
 Selling known or unknown goods against an unknown
price, such as selling the contents of a sealed box
 Selling goods without proper description, such as shop
owner selling clothes with unspecified sizes
 Selling goods without specifying the price, such as selling
at the 'going price'
 Making a contract conditional on an unknown event, such
as when my friend arrives if the time is not specified
 Selling goods on the basis of false description
 Selling goods without allowing the buyer the properly
examine the goods
 The Prophet (pbuh) prohibited the pebble sale and the

Qimar
Qimar includes every form of gain or money, the
achievement of which depends purely on luck and
chance.
 All Lotteries and Prize schemes based purely on luck
come under this prohibition.
 O ye who believe! Intoxicants and gambling,
sacrificing to stones, and (divination by) arrows, are
an abomination, of Satan’s handiwork…..: (5:90-91)
 He who played Qimar has disobeyed Allah and His
Messenger.” (Ibn Majah )

Honesty and Fair Trade (Ghishsh and
Khilabah)
Thus Manipulations and Mismanagement like Hoardings
 Black marketing
 Cheating
 Profiteering
 Short weighting


are
prohibited in Islamic Financial System.
Hiding the defective quality of the goods
 The prophet (PBUH) said: the truthful honest merchants
are with the prophets in the Day of Judgment.
Spending in the Good Cause
The Islamic economic approach is one, which is
directed
towards
the
achievement
and
actualization of justice in human relations.
 The result of this effort is falah or success and
salvation, and hayah tayyibah or good life in
this world and the hereafter.
 So Islamic banks don’t
permute to establish
any relation with commodities, services and
individuals whose moral practices are doubtful
 Some people spend Allah’s wealth (i.e. Muslim’s Wealth)
in an unjust manner, such people will be put in the (Hell)
fire on the day of resurrection” (Bukhari and Ahmad)

Buy Back
 The
financier sells an asset to the customer on a
deferred-payment basis, and then the asset is
immediately repurchased by the financier for cash
at a discount.
Two Mutually Conditional Contract
 Two
mutually contingent contract have been
prohibited by the holy prohibited by the holy
Prophet (pbuh).
 The sale of two item in such a way that one who
intends to purchase good is obliged to purchase
the other also at any given price.
 One sale transaction with tow prices.
 Combining sale and lending in one contract.
192 Ahmad Block, New Garden Town, Lahore - Pakistan.
Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056
Email: info@alhudacibe.com
www.alhudacibe.com