Foundational Difference between Takaful and Conventional Insurance
1.Is there a difference in substance between a Takaful non - profit , gratuitous arrangement , based on cross - subsidization, and a conventional insurance contract for gain, in the nature of a wager?
2. The answer depends on an anterior question :
Does the Shariah prohibition of gharar ( manifest uncertainty of outcome, based on future uncertain events , which may or may not occur ) influence a purely gratuitous contract , such as a donation? The answer is no, and may be best explained by the following example, in the context of futures:
A donates to B , the future fruits of his trees , which will harvest next spring. This donation is subject to a future , contingent , uncertain event ( gharar) which may or may not occur. If the fruits do not harvest on the future date, the donee / recipient suffers no loss, arising from the donation. On the other hand, If A sold the fruits to B , to harvest on a future date, at an agreed price, and the fruits do not harvest or mature, the buyer suffers a clear out of pocket loss, arising from the sale: he has paid the price, but receives nothing in return, in the context of a reciprocal contract of gain.
3. This conceptual distinction on the impact of gharar, upon different classes of contracts, was brilliantly highlighted by the great Maliki jurist , Shihaab al- Din al - Qaraafi, in his well known work, Al Furuq ( Differences) : see the 24 th distinction.
4. A medical scheme , registered under the Medical Schemes Act, 1998 , is also, in substance , a gratuitous, non - profit making arrangement, which works on the principle of cross - subsidization and mutual assistance, analogous to a Takaful arrangement, with the realized surpluses, accruing for the benefit of its members, including upon a winding-up.
And Allah Knows Best.
◦ M S Omar
◦ 22 March 2021
مثاله:
بيع ما تثمره الشجرة فى العام القادم، هذا عقد غرر لأننا لا ندرى هل ستثمر هذه الشجرة فى العام القادم او لا تثمر ، و اذا أثمرت هل ستثمر كثيرا او قليلا، ففى عقد المعاوضة المشترى دفع مبلغا ، اذا لم تثمر الشجرة فيضيع عليه هذا المبلغ ، و كذالك اذا أثمرت اقل مما كان يتوقع ، و قد تثمر اكثر مما كان يتوقع الباءع فيأخذ المشترى اكثر مما دفعه، و بالمقابل :
و هبة ما تثمره الشجرة فى العام القادم فيه نفس هذا الغرر و هو عقد تبرع ، فالغرر موجود فى عقود التبرعات كما هو موجود فى عقود المعاوضات ، و لكن فى عقود التبرعات لا يؤثر ، لان هذا الشخص الذى وهبت له ثمرة هذه الشجرة فى العام القادم لم يدفع شيءا، فإذا أثمرت يستفيد و اذا لم تثمر لا ضرر عليه ، و هذه وجهة نظر المالكية فى التفرقة بين تأثير الغرر فى عقود المعاوضات و فى عقود التبرعات.
و بناء على هذه القاعدة ، ان التجارة فى التأمين التقليدى، هناك جهة التى تغنم و قد تغرم، مثاله: اذا أنا دفعت الف قسطا عن سيارتى لشركة تجارية ، و فى هذا العقد غرر ، لان السيارة قد لا يصيبها شىء فالشركة تأخذ كل المبلغ ، و أنا لا أخذ شيءا،
و بالمقابل:
اما فى التأمين التعاونى ، فالمؤمن و المؤمن له واحد، و ليست هناك جهة تتاجر فى التأمين ، هم المشتركون ، الذين يستفيدون من ارباحها اذا فاضت عن التعويضات و تعود اليهم هذا الفاءض ، و هم الذين يغرمون اذا زادت التعويضات عن الاشتراكات ، هم متبرعون ، و الذين يديرون الشركة لا يملكون الشركة، هم موظفون يتقاضون مرتبات، هذا هو الأساس فى التأمين التعاونى.
والله تعالى اعلم
M S Omar 22 March 2021
Difference between Riba and Sale
1. A person sells a motor vehicle, fairly valued at R 100 000 for a price of R 200 000. The vehicle itself ( as the object of the sale) is exchanged as consideration for the price of R 200 000 based on the mutual consent of the contracting parties. In this situation, the sale is halal because it is in exchange of the asset per se, and is therefore not without reciprocal consideration فلم يكن أخذ من صاحبه شيئا بغير عوض
2. On the other hand, if a person sells R 100 000 in exchange for R200 000, payable over an agreed future period, the seller takes the additional R 100 000 without the exchange of any reciprocal consideration. We cannot say that the consideration for the additional R 100 000 is the granting of credit over the deferred period, because the pure time period deferment is not regarded as property in the Shariah.
لان الإمهال فى مدة الأجل ليس مالا
3. The Holy Quran accordingly states: “ Allah has permitted sale and prohibited Riba “ : Surah Al- Baqarah: Verse 275)
See Tafseer Al- Kabir ( Razi) and Tafseer Al- Khazen: commentary to verse 275 of Surah Al- Baqarah
MS Omar
27 October 2024
Permissibility of Sale of Goodwill , Trademarks , Patents, Copyrights and Intellectual Property in Shariah Law.
The Zakaatablity of Pension, Provident and Retirement Annuity Funds
1. The different situations are summarized below.
2. Where the person is employed in the public or private sector, and membership of a pension or provident fund forms part of the contract of employment, with the monthly contributions being deducted from his or her salary at source: Zakah is only payable, in the year of receipt or maturity, when the employee receives possession or control of the proceeds of the lump sum benefit. In such event, the net amount so received, after payment of prescribed taxes, will be added to the aggregate value of the Zakaatable assets( gold and silver + cash + trading stock + sound debts)and Zakah must be payable on the remaining unexpended amount thereof, on the relevant forthcoming Zakah valuation date, at the end of the year of receipt or maturity. No Zakah is payable for preceding years. و انما تجب الزكاة فيما يبقى عند نهاية الحول بضمه الى الموجودات الزكوية الاخرى و تزكيته
3. In this situation of employment, the contribution to the pension or provident fund, so deducted from salary at source, is from a Shariah perspective not deemed to be owned by the employee, but is in fact owned by the fund as a separate legal person. At best, the employee has, absenting possession, control and receipt, only a valid claim for the contribution against his or her employer. لا يقال انه ملكه الموءجر قبل قبضها فله المطالبة بها : ) البحرالراءق
4. In the case of a self - employed person, running his or her own business, different considerations apply. In this case, if the person voluntarily subscribes to a retirement annuity fund, Zakah is payable each year on the Fund value which must be added to the aggregate value of the Zakaatable assets as at the relevant Zakah valuation date. يوم وجوب الزكاة The reason is that this voluntary arrangement is analogous to a low risk fixed deposit, or, debenture for a predetermined period. The fact that the funds are not accessible until the member reaches the age of 55, or otherwise as prescribed by the rules of the Fund, has no Shari consequence for Zakah purposes, in this context. هذا بمنزلة السندات او ودائع لاجل
5. If the net lump sum proceeds of a pension or provident fund, due to a member upon retirement or resignation or retrenchment, are received or controlled by the beneficiary, and are thereafter voluntarily invested, ( eg: in a preservation fund), so as to inter alia provide a living annuity, then, in such event, the member must pay Zakah each year on the capital value of the investment. In addition, any unexpended cash balance remaining on his or her periodic income drawdown, will be added to his or her aggregate Zakaatable assets on his Zakah valuation date, at the end of the relevant Zakah year. و يزكى ما يبقى بضمه إلى الموجودات الزكوية الاخرى
يوم وجوب الزكاة عند نهاية الحول
Example:
Zaid enters into a contract of employment with a company. A term of the employment contract is that the employee must become a member of the provident or pension fund, ( “ Fund”), designated by his employer, and that his monthly contributions to the Fund will be deducted at source from his salary. Upon retirement or termination of employment, Zaid receives or is entitled to access a lump sum benefit of R 3 million ( after tax) from the Fund. The lump sum benefit of R 3 million is subject to Zakah in the year of receipt or maturity, although a portion may be used to purchase a life annuity. No Zakah is payable for preceding years.
If Zaid chooses to transfer the lump sum of R3 million ( or a portion thereof) to a preservation or pension generating fund, then Zaid must pay Zakah on the passing of each lunar year thereafter, on the value of his investment in the preservation or pension generating Fund, on his relevant Zakah valuation date.
On the other hand, Muhammad, a medical practitioner in private practice, chooses to subscribe, and make voluntary monthly contributions, to a retirement annuity fund. In this case, Muhammad must pay Zakah on the passing of each lunar year on the value of his investment in the retirement annuity fund, together with his other Zakaatable assets, on his Zakah valuation date.
And Allah Knows Best
M S Omar
8 May 2021
Updated: 23 March 2024
Zakah Treatment of Shares in Listed & Unlisted Companies
Treasure Prophetic Dua
اللَّهُمَّ إِنِّي أَسْأَلُكَ الثَّبَاتَ فِي الأَمْرِ وَأَسْأَلُكَ عَزِيمَةَ الرُّشْدِ وَأَسْأَلُكَ شُكْرَ نِعْمَتِكَ وَحُسْنَ عِبَادَتِكَ وَأَسْأَلُكَ لِسَانًا صَادِقًا وَقَلْبًا سَلِيمًا وَأَعُوذُ بِكَ مِنْ شَرِّ مَا تَعْلَمُ وَأَسْأَلُكَ مِنْ خَيْرِ مَا تَعْلَمُ وَأَسْتَغْفِرُكَ مِمَّا تَعْلَمُ إِنَّكَ أَنْتَ عَلاَّمُ
الْغُيُوبِ
This comprehensive but concise, important, insightful authentic prophetic Dua covers all the noble objectives of this world and the hereafter. The Holy Prophet صلى الله عليه و سلم informed the well-known companion Shaddad bin Aws شداد بن اوس : “ if you see people hoarding gold and silver, then treasure these words”, because the benefits of this Dua are perpetual.
Translation
“ “O Allah, I implore You for steadfastness in all matters of obedience ; I ask You for the tawfiq ( التوفيق)of a firm determination to do righteous actions; I beg your tawfiq to show gratitude( through obedience) for the innumerable , countless blessings that you have conferred upon me;
and grant me the tawfiq to sincerely worship You in the best manner ( in accordance with the Sunnah) ; I ask You for truthful speech, and a pure sound heart secure from all spiritual diseases and bad qualities; I seek Your protection (from all classes of ) evil , of what You know; I ask You for all classes of good, of what You know ( because Your knowledge encompasses everything); and I seek forgiveness for what You know; ( as Allah knows every sin). You are the All-Knowing of the unseen.”
( authentic according to the conditions fixed by Imam Muslim). Narrated by Tirmidhi and Ibn Hibban. In another narration, Nasai and Hakim, the words خلقا مستقيما ( good character)has been added .see generally: Imam Shaukani: تحفة الذاكرين
Do the grandchildren( predeceased son’s children ) automatically inherit in the presence of the surviving son or sons of their deceased grandfather?
1. Take the following example: the father has two sons ( Zaid and Yusuf) and a daughter( Fathima).
2. Zaid dies in the lifetime of his father in a motor accident( that is, predeceases his father), leaving three children, two sons, and one daughter. ( “ grandchildren “)
3. The father subsequently dies: he is survived by his son ( Yusuf) and his daughter ( Fathima), and his three grandchildren, being the children of the predeceased son, Zaid.
4. Do the grandchildren ( children of the predeceased son, Zaid ) automatically inherit from the estate of their grandfather, in the presence of their surviving paternal uncle, Yusuf, according to the Islamic Law of Succession?
5. Stated differently, do the grandchildren automatically step into the shoes of their predeceased father ( Zaid), and take the share ( 2/5th) that would have devolved upon their father, Zaid, had he survived their deceased grandfather?
6. The answer by consensus is: No. The fundamental principle in this specific context of the grandchildren surviving in the presence of their paternal uncle/s (being the living son or sons of the deceased) , the agreed applicable rule applies to the effect that the nearer in degree to the deceased excludes the more remote. الأقرب يحجب الأبعد
7. The grandfather however has a mustahab duty to provide for the grandchildren, in these circumstances, either in his lifetime or through a wasiyah , namely, a voluntary testamentary bequest not exceeding one- thirds of the net estate, remaining after payment of debts. من ثلث ما بقى بعد الدين
8. A wasiyah is not compulsory: it is a voluntary gratuitous testamentary bequest to a close relative or a third party , who is not a prescribed heir of the deceased at the time of his or her death , but it’s grant is limited to and does not exceed one - thirds of the net estate. تمليك مضاف الى ما بعد الموت بطريق التبرع
9. It is important, in the case of a predeceased child of a testator leaving children, that the testator chooses to make an appropriate bequest in the form of a wasiyah in his will, bequeathing an appropriate share to his or her surviving grandchildren, subject to the condition that such wasiyah must not exceed one - thirds of his or her net estate remaining after payment of debts. و تجوز بالثلث للأجنبي عند عدم المانع : الدرر المختار
And Allah Knows Best
M S Omar
29 January 2022
Most Beneficial Prophetic Supplication
1.Imam Allama Ibn Al- Qayyim Jawziyya ( ra) , died 1350 AD, one the greatest classical Muslim thinkers, states in his famous work on spirituality, مدارج السالكين, “ The Ranks of the Divine Seekers “, to the effect that the best and noblest are those who worship and supplicate for help to Allah upon establishing it ; therefore, worship of Allah is their intended purpose; and their plea to Him is to help them in establishing such worship, and grant them success in establishing it. Thus, the best righteous thing to ask the Exalted Lord is help in seeking His Pleasure الاعانة على مرضاته , as embodied in the Opening verse 5 of the Holy Quran: “ To Allah alone, we worship; and to Allah alone , we pray for help”.
2.This was taught by the Holy Prophet صلى الله عليه و سلم to the famous companion, Muaz Ibn Jabl رضي الله عنه as follows: “ O Muadh : “ I love you dearly, so do not forget to say at the end of every salah:
اللهم اعني على ذكرك و شكرك و حسن عبادتك.
“ O Allah, help me to remember You,( help me) to express gratitude to You, and ( help me) in beautifying Your worship.”
3.Shaykh al - Islam Ibn Taymiyyah ( ra) , probably the most influential classical Muslim thinker stated: “ I have pondered as to ( which is ) the most beneficial Dua: I then concluded that it is the Dua which “ begs the help of Allah, to seek only His Pleasure "
سوال العون على مرضاته
4. Then, I found it in the opening verse of Al - Faatihah, embodied in
اياك نعبد و اياك نستعين
قال شيخ الاسلام ابن تيمية: تاملت انفع الدعاء: فاذا هو سوال العون على مرضاته. ثم رأيته في الفاتحة في اياك نعبد و اياك نستعين. راجع: مدارج السالكين: ابن قيم الجوزية: الجزء الاول: فصل: اقسام الناس في العبادة و الاستعانة
Sale of an Apartment, OFF Plan , Prior to Possession
1. A person buys an apartment from a developer, off-plan, for an agreed price, and agreed specifications, which apartment is still to be constructed, at a future date, or is still in the course of construction. ( “ the agreement “).
2. The original buyer pays to the developer a deposit or specified installments , in accordance with the agreement, prior to the completion and delivery of the promised apartment.
3. The original buyer thereafter purports to sell ( or transfer ) the rights and obligations in the agreement to a third party for a higher price, prior to the completion and delivery of the promised apartment.
4. The question arises whether the sale by the original buyer ( to a third party), and the resultant profit is permissible according to the Shari’ah.
5. The answer is: No.
6. The reason is that the contractual floor plan arrangement falls within the scope of the special manufacturing contract of Istisna.عقد الاستصناع
7. As such, the original buyer is prohibited from selling the promised apartment to a third party, until he or she has taken delivery and possession thereof, as a completed constructed apartment, in accordance with the agreed specifications.
8. Stated differently, the original buyer only assumes the Shari risk (ضمان) and ownership, once he or she receives delivery and possession of the completed apartment. الخراج بالضمان
9. Any purported sale by the original buyer to a third party of the promised apartment prior to completion and possession thereof, is accordingly invalid and void.
10. It is established in Shariah that a person is prohibited from selling what he or she does not own .هذا من باب بيع لما لا يملكه الانسان
11. The aforesaid conclusion is the fatwa of the distinguished contemporary jurist Mufti Taqi Usmani.
لا يجوز بيع المصنوع قبل قبضه من الصانع حقيقة او حكما الى الطرف الثالث : و بناء على ذالك لا يجوز ان تباع الشقة التى اشتريت على المخططات قبل ان يتسلمها المشترى الاول.
And Allah Knows Best
M S Omar
13 August 2022
Shariah Compliant Guidelines for Investing in the Stock Exchange in accordance with AAOIFI Shariah Standard 21
1. It is permissible to buy the issued shares in a listed company, whose core trading activity is Halal, but subject to the 5 percent rule relating to the purification of the impermissible income associated with a share, as set forth in paragraph 4 below.
2. However, despite the core activity of the company being Halal, the company may be engaged, as an incidental activity, in placing its surplus funds, generated from it’s permissible core activities, in a call account or money market instrument, or otherwise the company may also be engaged incidentally in an impermissible activity ( such as , sale of alcohol), and thereby earn impermissible income.
3. Does such impermissible income render the investment and /or trading in the shares of the company concerned Haram?
4. The contemporary Shariah experts, on the grounds of genuine need, have permitted investing in such a company ( whose core activity is Halal) provided that the aggregate total impermissible income of a company derived from impermissible incidental activities, or impermissible assets, as disclosed in the relevant financials, or, where necessary reasonably estimated, must not exceed 5 percent of the total permissible revenue generated by that company, during the accounting period under review.
5. The share itself must be purified of the impermissible income, on the basis that the proportionate share of the impermissible income , must be mandatorily removed and disposed off to charity, irrespective of whether the company concerned has shown a profit or a loss during the accounting period under purification. For example, the impermissible income for the relevant accounting period is R 100 000,00 and there are 100 issued shares in the company. Each share must accordingly be purified to the extent of R 1000. If the investor or fund owns 10 shares in the company, then the sum of R 10 000 must be purified and compulsorily transferred to charity .على سبيل التخلص منه
6. In this regard, the total investment in incidental impermissible activities, such as investment in interest-bearing securities and/or sale of alcohol, or another impermissible thing, should not exceed 30 percent of market capitalization, or, the total asset value of the company concerned.
6. The ownership of a share in the issued share capital of a company represents ( in substance) a proportionate undivided share in the underlying assets of the relevant company. يمثل السهم حصة شائعة في موجودات الشركة :
و شهادة السهم عبارة عن وثيقة للحق فى تلك الحصة: قرار مجمع الفقه الاسلامي الدولي
7. It follows that, if the core activity of the company is Haram( eg : manufacturing and distributing alcoholic beverages), then it is equally prohibited to buy and sell shares in such a company.( because the shareholder will be deemed to be owning and trading in such impermissible assets, not recognized as property in the Shariah). If a person wrongfully owns such shares, then he or she must sell them to a non - Muslim at a price proportionate to the Halal assets of the company concerned, such as buildings , vehicles etc, which are not directly connected to an impermissible activity. غير المتمحضة للعمليات المحرمة (see Mufti Taqi Usmani, Fiqhul - Buyoo , volume 2, page 1057 - 1058).
لان محل العقد عند تداول الأسهم هو
هذه الحصة الشائعة.
8. In the case of a Shariah-compliant unit trust fund ( registered under the Collective Investment Schemes Control Act, 2002 ), the impermissible income, not exceeding 5 % of total permissible revenue is properly deducted at source and mandatorily disposed off to charity.
9. It is not permissible to buy preference shares ( which entitles the holder to priority in profits), and interest bearing debentures.
لا يجوز إصدار اسهم ممتازة لها خصائص مالية تودي إلى إعطاءها الأولوية عند التصفية أو عند توزيع الأرباح .
10. The shares of a company whose assets consist solely and exclusively of cash and receivables must be bought and sold at face value. In this context, the transaction constitutes an exchange of money for money, which must be equal on both sides. Any sale at a premium or discount, falls within the definition of riba. However, investment in a company ( whose core activity is Halal) is permissible , if the tangible illiquid assets are not less than 30 % of the total market value of the assets , in which event the value of cash, receivables and cash equivalents are deemed to be subordinate
لكونها حينئذ تابعةلان اسهم تلك الشركة لا تمثل الا نقودا، فلا يجوز بيعها باقل أو اكثر من قيمتها الاسمية.
11. All conventional forward and future transactions within a stock exchange is prohibited for several reasons, including the fact that there is no real transfer of the Shariah risk, through actual delivery; in many cases, the transaction constitutes a settlement based upon a difference in prices only. Similarly, conventional derivatives, options , swaps, and short sales are impermissible.
لانه من أنواع المجازفات والمقامرة التي لا يراد فيها حقيقة البيع ، و تنتهى غالبا إما بالمقاصة بين اطرافها و إما بتسوية فروق الأسعار ، و هي نادرا ما تنتهي بالتسليم و التسلم فعلا.
12. Although borrowing on interest is prohibited, the proceeds of the loan are nevertheless lawfully owned by the borrowing company, with the result that goods or assets purchased in exchange thereof are Halal. The total amount so borrowed should not exceed 30 percent of market capitalization or total asset value of the company concerned at the relevant time.
اما عملية الاقتراض الربوي فحرام بلا شك، و يأثم بها فاعلها ، و لكن المبالغ المقترضة تدخل فى ملك الشركة و ضمانها، فلا يحرم ما يكسبه بها.
13. The above mentioned guidelines are consistent with the provisions of Shariah Standard 21 formulated by the panel of Shariah experts of AAOIFI, headed by Allamah Mufti Taqi Usmani.حفظه الله
M S Omar
Revised: 24 November 2022
قال شيخ الاسلام ابن تيمية رحمه الله : من اختلط بماله الحلال الحرام اخرج قدر الحرام و الباقى حلال له: مجموع الفتاوى: ج٢٩: ص ٢٧٣
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