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Decisions and recommendations of AMJA’s third annual convention

Decisions and Recommendations from AMJA’s 3rd Annual Convention – Sokoto, Nigeria

اضغط هنا لقراءة توصيات المؤتمر باللغة العربية

 

In the name of Allah, the Most Merciful, the Grantor of Mercy

All praise is due to Allah, and may peace and salutations be upon the Messenger of Allah, and upon his family, companions, and those loyal to him.

From July 21st – 25th, 2005 / 15th – 19th of Jumada II, 1426, the third annual AMJA Convention took place in Sokoto, Nigeria. It was attended by a significant number of active participants, namely a wide spectrum of AMJA scholars, Nigerian scholars, and official representatives from the Nigerian government who attended the opening session.

Over five consecutive days, detailed discussions took place between AMJA’s esteemed members and experts regarding the various topics of concern for Muslims residing in the West at large, and particularly in America. AMJA then issued a number of decisions that are summarized below.

Topic One: Asserting Paternity for those Born of Fornication

In this decision, AMJA emphasizes that preserving lineages is a primary Sharia objective, and that fornication does not establish paternity in Islam. However, a man can claim paternity of a child whose lineage is unknown, so long as he does not admit that he was born of fornication, and that their ages deem such a paternity possible, and that the child does not deny this – if he was of a discerning age.

Topic Two: Residing Outside the Lands of Islam

AMJA asserts in this regard that the norm for a Muslim is to reside within the lands of Islam, in order to protect his religious commitment and live in support of the believers. It is impermissible for him to leave these lands except for a good intention such as seeking knowledge, earning a living, pursuing religious freedom, and the like – while keeping the intention to return whenever the circumstances permit that. As for the Muslims indigenous to these non-Islamic lands, they should seek to remain in these lands while exhibiting whatever they can of their Islam and enduring the hardships that befall them, since they represent the fertile seeds most capable of establishing Islam in such societies.

AMJA also asserts that the ruling on residing outside the lands of Islam, for the Muslim communities there, varies in light of their respective conditions. It is permissible for those capable of openly practicing their Islam without fearing persecution for themselves or their dependents. It is mandatory for those that must reside there to teach Islam, look after its people, and refute the doubts cast by its antagonists regarding it. It is prohibited for those who will most likely jeopardize their religious commitment by it, or that of their dependents, or will be prevented from openly practicing their religion.

AMJA also asserts in this regard the vital importance of upholding balance and moderation, and opening the doors for civil discussions, in order to resolve the many challenges that will arise. Moreover, there must be a determination to establish Islamic institutions, support those already existent, and allot their responsibility to those qualified and trustworthy – in order to preserve their Islamic identity and religious unity.

 

Topic Three: Establishing the Lunar Months in Light of Modern Advancements

AMJA asserts in this regard that a verified eye-sighting of the moon is the basis for establishing the lunar months, unless a strong proof arises to discredit that sighting. Sighting the moon locally or internationally is an ijtihâdi (discretionary) matter between the jurists and hence a legitimate and acceptable disagreement, where one can choose the position that is more unifying and inhibits the harms of disunity. For this reason, AMJA suggests that the Muslim communities in the West follow the first announcement of a moon sighting in the East, since it being sighted in the East means it can also be sighted in the West. This would better unify our ranks and ward off dispute. As for those who adopt a position that differs from their local Muslim community, they must not announce that, nor use it to confront others and accuse their religiosity.

Topic Four: Insurance and its Various Types that are Prominent in American Society

AMJA has asserted that which has been established before, in the declarations and recommendations of the other fiqh assemblies, that all forms of commercial insurance are prohibited, and that only the Islamic form of cooperative/benevolence insurance is permissible.

The assembly then declared that a temporary concession is made when a pressing need exists for a particular insurance, until the Islamic alternative is found which can suffice this need. AMJA also asserted that a concession is made for insurances that are subsequent, meaning not sold separately of the original transaction (like warranties sold for an item when purchasing it). These would differ from an entirely independent contract that is dedicated to the sale of insurance, because of the known legal maxim, “some matters that aren’t overlooked in the primary contracts may be overlooked in the secondary clauses.”

 

Topic Five: The Financing Institutions in America

AMJA has deferred the discussion on this topic in light of the researchers’ inability to attend the conference due to unexpected conditions. It has advised the attendees to submit their comments in writing to the Secretary of the convention, to be forwarded to the esteemed researchers, in addition to advising that this matter be given careful attention due to the need for it, and be included in the topics of next year’s conference.

Topic Six: The Recommendations of the Islamic Investments Seminar in Sacramento, California

AMJA has approved of these recommendations after elaborate discussions surrounding them, and after revising some of their decisions as noted in the attached documents.

Finally, AMJA has released a declaration regarding the acts of violence and terrorism, in light of the unfortunate events in Sharm al-Sheikh and elsewhere.

AMJA wishes to record its thanks and appreciation to the scholars of Nigeria whose active participation and strong attendance throughout the sessions of the convention was vital to its success and the accuracy of its decisions. It also wishes to extend its thanks and appreciation to the government of Sokoto province, and the governor in particular, Dr Attahiru Bafarawa, and the nation of Nigeria at large for their gracious hosting and honorable welcome.

 

And Allah is ultimately sought from our endeavors, and only He can guide to the straight path.

 

 

 

Conclusions and Recommendations of the Session on Financial Investments in Islam

Sacramento, CA

Rabee al-Akhir 5-9, 1426

May 13-17, 2005


بسم الله الرحمن الرحيم

In the name of Allah, the Ever-Compassionate, the Ever-Merciful

الحمد لله والصلاة والسلام على رسول الله وعلى آله وصحبه ومن والاه

All praise be to Allah alone and may the peace and blessings of Allah be upon His messenger and upon his family, companions and followers.

During the period of Rabee al-Akhar 5-9 1426 A.H. (May 13-17 2005), by the grace and mercy of Allah, the Second Annual Mosque and Islamic Center Imams’ Workshop was held in Sacramento, CA, on the topic of “Financial Investments in Islam.”

The proceedings of this workshop were comprised of twenty sessions over a five-day period. Forty Imams, representing forty Islamic centers from various parts of the United States, attended the workshop. The attendees also included Professor Husain Haamid Hassan, the President of the Assembly, and Dr. Salaah al-Sawi, the General Secretary of the Assembly. Also in attendance were the following members of the AMJA Fatwa Committee: Dr. Yusuf al-Shubaili, Dr. Mohamad Muwaffak al-Ghaylany, Dr. Main al-Qudah and Sh. Waleed al-Menesi. The workshop also used video conferencing to reach those who could not attend the conference.

A number of issues related to financial transactions were covering during this workshop, starting with the ethical behavior of a Muslim businessman and contemporary insurance contracts, moving on to Shareeah investment contracts, such as silent partnerships, cost-plus sales, rent-to-own, home financing in the United States, such as Guidance, Lariba, Amanah and others, and ending with the business contracts that are forbidden by the Shareeah.

The conclusions and recommendations of the workshop are as follows:

Contract Theory and Sales

A contract is the meeting of two wills which entail legal commitments. The default ruling concerning contracts and stipulations is that of permissibility. Nothing is considered prohibited unless there is a text or analogical reasoning indicating its prohibition.

Items prohibited for sale or purchase

Prohibited items fall into one of three categories:

(1) Beverages that cloud the mind; this prohibition is in order to protect the mind from what beclouds or harms it.

(2) Foods that harm one’s nature, such as harmful foods that affect the heart, thus protecting the heart from being harmed.

(3) Items that affect one’s religion and morals and that lead to temptation or ascribing partners to Allah, in order to protect faith from what harms it. This last category is inclusive of all items prohibited in order to protect the mind, hearts, body and religion.

Everything that is prohibited to be consumed in the Shareeah is also prohibited to profit from. Thus, it is not valid to sell any such item, such as carrion, inclusive of all of its parts, save for fish and locusts, and blood, save for the liver and spleen. (There is a scriptural text that covers those exclusions.) This would also include the prohibition of selling pork and all of its forms, intoxicating beverages and drugs, save for anesthesia and narcotics used as necessities for medicinal purposes for which there is no appropriate substitute.

High-Risk Transactions

Gharar (high-risk transactions) are prohibited in the Shareeah.[1] Gharar refers to a situation where the outcome is uncertain or it will fluctuate between being successful or a failure, akin to a zero-sum gain where one person will gain at the expense of the other’s loss. The difference between gharar and gambling is that gharar takes place in business transactions while gambling takes place in sports and competitions. One says, “He entered into a risky transaction,” as opposed to, “He gambled on a sport/game.”

Gharar is prohibited only when the following conditions are met:

(1) There must be a great deal of risk/uncertainty involved. For example, buying a house without knowing the complete status of its foundation or buying a gown and not knowing what its lining is filled with are not considered high-risk.

(2) The uncertainty must be related to the object of the contract. Uncertainty related to something secondary to the object of the contract is overlooked. Thus, it is permissible to buy a pregnant camel [and the uncertainty concerning] what is in its womb is overlooked. Similarly, one may be a camel and [the uncertainty concerning the amount of] milk in its udders is overlooked.

(3) The contract must be a mutually onerous contract. In volitional contracts, such as donations and gifts, things are overlooked that may not be overlooked in mutually onerous contracts. Thus, one can give as a gift a lost animal to whoever finds it.

(4) Gharar will be overlooked if there is a general need [for its related transaction]. The severity of the prohibition related to gharar is less than that of interest. Thus, an exemption can be made in the case of need. The workshop emphasized the necessity of having the scholars and specialists record the exact parameters of need and necessity so that they may be applied to contemporary situations.

Credit Sales

Credit sales are permissible, even if the price is increased due to time, with the condition that the price cannot be further increased as a penalty whenever the debtor is late in payment.

It is allowed for a company to engage in credit sales while displaying both the cash price as well as the credit price with a given time-span. However, the sale will not be valid unless the two parties agree as to whether it will be cash or credit. If there is any doubt as to whether the contract was for cash or credit, the sale will be void.

If the debtor is late in a payment, it is not allowed to charge him a late fee, regardless of whether it was previously agreed upon or not, as that would be forbidden interest. However, the creditor is then allowed to demand the remaining balance of payments when the debtor is late in paying what is due. The creditor may also ask for collateral in order to fulfill his rights in the case of default. However, the usufruct of that collateral must belong the debtor in order to avoid it leading to interest.

Other Aspects Related to Sales

It is forbidden to sell something before taking possession of it, as the Prophet (peace and blessings of Allah be upon him) has forbade that.[2] Possession is defined by custom and may vary from item to item.

The practice of al-Eenah is prohibited.[3] This is where one party sells an item, service or usufruct over time and then immediately buys it back as a spot transaction for a lower price. This can lead to interest and is a means of trying to get around the prohibition of interest.

Bai al-Wafaa is also prohibited. This is where a person sells an item on the condition that when the original seller is able to return the entire sale price to the buyer, the item will be returned to the original seller. This is prohibited as it is a means to attempt to get around the prohibition of interest as the goal is simply for the original seller—who is actually truly a lender in this case—to procure the usufruct and profit in exchange for lending the amount of money that was the original stated purchase price. In addition, this practice has a condition that contradicts the goal of a sales contract [that is, perpetual ownership]. If they wish to guarantee the loan, they can resort to collateral or mortgaging.

Every sale that assists a person to commit a sin is forbidden[4], such as selling arms during a time of civil war, to a bandit or to one who will use it for forbidden purposes in general, as that would be assisting in sin and aggression.

It is permissible to sell an item that is not present as long as it is properly described and identified such that no dispute should later arise. If the item then comes as described, the sale is binding. If it does not meet its description, the buyer has the option of going through with the transaction or cancelling it.

It is permissible to sell an item wherein the seller declares that it is free of defects according to his knowledge. In this case, gharar has been removed. However, a seller cannot claim that the item is free of defects while he actually knows of defects and is concealing them. This is cheating and deception and contradicts the obligation of doing well towards others. It is permissible to purchase an item on the condition that its defects will be corrected by the seller.

Profit is the difference between what one paid for an item and what one sold an item for, minus any business expenses. The Shariah does not lay down any specific limitations on profits on business. It is left to the circumstances of the environment, supply, demand, custom and the legal structure. At the same time, though, Islam has prohibited hoarding and exploiting those items that people are in need of. In addition, the Shareeah emphasizes moral and ethical behavior such as kindness, contentment, tolerance and facilitation.

If the surrounding circumstances related to the contract undergo dramatic general changes which were completely unexpected by the contracting parties and not due to them or under their control, such that continuing with the contract would cause them abnormal losses, then it is permissible for a judge to decide any dispute between them, if he is so requested. He can adjust their rights and responsibilities in a manner that will prevent the two parties from having great losses. The judge may distribute the rights and responsibilities based on the advice of experts in order to attain justice and avoid harm and wrongdoing.

Concerning lease to purchase, if the contract is such that the lessee leases the automobile for a specified time period and then at the end he has the option of returning the automobile or purchasing the automobile at an agreed upon price at the time of the contract or after its conclusion, there is no harm in such a contract.

Al-Tawarruq

Al-Tawarruq is where a person buys something on credit and then turns around and sells it for cash to a third party, simply in order to get cash. When done in this manner, the scholars differ over whether it is permissible, some saying it is permissible, while others say it is not. However, it may be considered an exemption if someone is in great need and is driven to do it. This exemption only holds if the purchase is not purchasing it from and reselling it to the same individual for a smaller cash price, neither directly nor through an intermediary. If that is done, then it is al-Eenah and is forbidden.

Organized Tawarruq

Organized tawarruq is where an individual is seeking cash in exchange for a greater amount of money to be paid over time. This is where a third person, the middle-man, arranges to sell something to the one who needs cash over time but has already arranged for a third party to purchase it from him for cash at a lower price. This organized action is forbidden as it simply comprises a means to get cash for a debt over time for a greater amount, which is the forbidden interest.

Mudhaarabah (Silent Partnership)

Mudhaarabah is where one party puts forward capital that will be used in return for profits. [Thus, creating two entities, “labor,” and “financier.”] This is a form of individual or group investment and it has been successfully applied in a group form in contemporary times. It is a Shareeah sanctioned contract according to the consensus of the Muslims.

There is no problem with setting a time limit for the mudhaarabah, according to the strongest of the two opinions among the scholars, as is the view of the Hanafis and Hanbalis. However, it is not permissible for “labor” to further borrow any money in the name of the investment, unless “financier” permits that, as otherwise that would imply a further monetary burden on “financier” without his permission. If “labor” does actually do that without permission, he then becomes a partner in the venture to the percentage of that increase in capital and he alone is solely responsible for it.

There is no harm if “labor” enters into another mudhaarabah contract with a third person as long as that does not interfere with his efforts for the first mudhaarabah contract.

The “labor” can subcontract the mudhaarabah by giving that money to another “labor” if the “financier” permits that or if he has left the affairs of the work to “labor’s” authority. Similarly, “labor” may involve others in his work for the mudhaarabah.

It is a condition of mudhaarabah that the profit be known and divided among the two parties as comingled property. If one of the two parties specifies a specific return, the contract is void, with no difference of opinion on that point as that contradicts the very nature of mudhaarabah and will turn the contract into an interest-bearing agreement. The leading Imams have all agreed that it is a condition for the soundness of a mudhaarabah contract that the profit is divided between the financier and the laborer in a comingled sense without an amount pre-specified for either one of them.

Profit in mudhaarabah is only after the capital investment is covered. The worker has no right to profit until he returns the initial investment. Then the profit is to be divided among them according to their previous agreement. As for any loss, that will solely be upon the financier. In that case, the labor will only lose his efforts.

The laborer does not take his portion of the profits except when the profits are divided. The ownership of the profits is not complete until the final accounting, regardless of whether it be a liquidation or simply an accounting step. There is no harm in their being a premature distribution as long as it is later adjusted by the final accounting determination.

The laborer is not to be held responsible for anything except what occurs due to his negligence or any transgression on his part. Similarly, no weight would be given to any legal stratagem that may be attempted to get around this principle.

Mudhaarabah is a non-binding contract. Either party can cancel the contract at any time. However, according to the strongest opinion, each party must complete a project once it is began in order to prevent the harm that could result from an unexpected pulling out of either party.

Muraabahah (Cost-Plus Sale)

Muraabahah is a type of cost-plus sale where the profit margin is known. Since it is a type of sale, what is permissible with respect to sales is permissible with respect to this type and what is forbidden with respect to sales is forbidden with respect to this type. Simple bargaining is preferred by the scholars as muraabahah is built upon the premise that the seller is being honest and straightforward in expressing his costs, while people are often influenced by their wants to distort or change facts. These types of transactions must be void of any type of deception or doubt. Thus, everything that would affect the buyer’s decision to buy must be made spelled out.

The most common form of muraabahah today is wherein the financial institution receives an order from a client to purchase a specific item with a detailed description with a promise from the buyer that he will buy it from the institution through muraabahah. The financial institution will then purchase that item and then turn around and sell it to the buyer at cost plus an agreed upon profit margin.

In this manner, it is a legal contract as long as the financial institution undertakes the risk of the item being destroyed until it turns it over to the buyer and the financial institution also takes responsibility for any defects and other conditions that would allow an item to be returned after purchase. In addition all of the conditions of a sale must be met and all impeding conditions must be absent.

The promise that comes from the purchaser or the one ordering the item is a one-sided promise. It is morally binding on the promisor unless he has some acceptable excuse. It is legally binding upon the promisor if the promisee has undergone financial costs as a result of the promise made.

However, a mutually binding promise from both sides is permissible in muraabahah only as long as both parties or one of the parties has the option to opt out of the contract. If there is no such option, such a promise is not permissible as a mutually binding promise is virtually the same as a sales contract and a sales contract requires that the seller be in possession of the item that he is selling, as the Prophet (peace and blessings of Allah be upon him) prohibited selling that which one does not possess.[5]

 

Loans and Interest

The interest that banks pay are the equivalent of the ribaa (interest) in pre-Islamic times which has been clearly prohibited in the Book of Allah. No weight is to be given to the incoherent explanations that attempt to permit the giving or taking of this interest. There is also no exemption in paying interest except in a state of necessity. As for loaning money on interest, it is inconceivable that such would ever be a case of necessity or need.

With respect to the prohibition of interest, there is no difference between consumption or production loans. The Shareeah has left no means open to profiting from giving loans. Instead, for the purpose of profit, the Shareeah has sanctioned other forms of contracts, such as mudhaarabah, muraabahah, mushaarakah and the like, which are built upon a just distribution of risk and gain, with profits being in exchange for responsibility.

The prohibition of interest holds for every place on the earth and below the sky—the land and Islam and the land of kufr are the same in this respect.

The bogus arguments justifying interest in the name of inflation are also void. In any case, the creditor faces that inflation. A person is only held responsible for that which he caused due to negligence or transgression. Had the lent amount remained in the hands of the creditor, he would still face the loss of its value due to inflation. Furthermore, the effects of inflation are equally on all credit and future payments and there is no justification to single out loans in adjusting for inflation.

The default concerning loans in the Shareeah is that they are contracts of assistance wherein the individual is seeking the pleasure of Allah and trying to remove a hardship from a friend. There is no room in them for investments or profiteering. Every increase that is stipulated transforms it into a forbidden interest contract and exposes its participants to war from Allah and His Messenger.

The default concerning any interest received is that it is not pure to consume. One must return it to the debtor if possible. If one is not able to or if the money came from a conventional interest-dealing bank, then the person must purify himself from this interest by using it for general, public benefits. The person will not be rewarded for such an act as charity, as Allah only accepts what is pure, but the person may be rewarded for his staying away from what is forbidden.

The exception to the above is any interest that one received before becoming Muslim or before knowing about its prohibition—if one is an excused state. In that case, the interest is overlooked and the person is not required to return it or get rid of it, as Allah has said, “If the admonition from his Lord reaches him and he then stops, then for him is what had preceded and his affair rests with Allah” (al-Baqarah 275).

Another exception relates to financial institutions that used to be interest-based but are converting to being Islamic institutions. They are not required to relinquish what they had gained through interest transactions, as that would be a hindrance to the Islamization of that institute. Instead, the shareholders are advised to sincerely repent to Allah and increase their acts of charity due to their person responsibility. However, this is all left to their personal conscience and taqwaa of Allah.

The default ruling concerning any interest that is yet due is that it is null and void, without any difference of opinion among the scholars. The creditor can only have his principal. He is not to commit wrong nor will he be wronged.

An interest-bearing loan agreement is a void agreement in the Shareeah and is forbidden without any dispute. However, if they void the interest portion of the loan agreement, the contract can be made sound and the two participants would then have made themselves innocent.

The default concerning debts is that they are to be repaid in the same nature as they were given and not according to their value. However, if a currency is no longer being used or has lost is worth, then its value can be taken into consideration. If there is a dispute, it should be taken to the courts. The committee recommends that the exact parameters of loss of value and worth be discussed in the future.

There is no harm in discounting part of the debt when someone pays it in advance, as long as this came about afterwards between the creditor and the debtor and was not stipulated in the contract. Trading and selling debt for a smaller spot price is not allowed, as it leads to the ribaa al-naseeah which has been prohibited by Allah and His Messenger.

It is not permissible to have a late fee on debt payments, regardless of whether that debt was the result of a cash loan, consumption item or credit purchase. The creditor can turn to permissible means of preventing someone from delaying his payment and encouraging him to pay on time. This can be done by adhering to the principles that have been laid down for the Islamic banks.

There is no problem with late payments for other types of contracts which were originally not financial debts, such as construction contracts and the like.

If a Muslim is forced to accept a condition of penalty for late payment in contracts such as rental agreements, electric company agreements, phone company agreements and other “take it or leave it” type agreements, is it permissible for him to agree to that as an exemption but he must make his payments on time in order to avoid any sin that may result from dealing with interest, as the one who devours interest and the one who pays interest are equally sinful.

Some companies offer their employees savings [and retirement] accounts. These accounts have penalties associated with them if a person withdraws money from them before retirement or before when he has the right to do so, so that he does not consume that wealth. If he borrows from it, he has to return more and that is permissible as long as he is certain that the money is returning to his account, as interest can only take place between two parties while in this case there is taking and returning of one party only.

 

Credit Cards

A credit card is a card that allows its carrier to meet his needs of purchasing items or services via credit. He will be required to pay interest or a late fee if he is late in making his payment.

The default ruling concerning these cards is that their contracts are invalid as they are contract interest-bearing clauses, as the cardholder must agree to that interest and is required to pay it when demanded.

An exemption can be made for getting a credit card if it is a practice of everyone in society, if there is a strong need for it, if there is no sanctioned alternative, if one has reason to believe that he will be able to pay the bills on time and will thus avoid interest payments, if he only uses it according to his need, if he pays all of the due amount at once without delay and if he stops using it if he has a credit history that allows him to achieve his work and needs. Anything that is permissible due to need is also restricted to that need alone.

It is not permissible to get a cash advance through those cards except in the case of necessity as such cash advances have interest applied to them at the first moment and there is no way to escape that interest charge.

Debit Cards

Debit cards are related to one’s checking account and given free of charge by the banks so that their customers can access and use their accounts at any time given at the point of sale or through ATMs.

There is no harm in getting and using a debit card as it does not deal with debt. At the most, it is assigning the bank as one’s agent in fulfilling a payment from one’s account that is with them.

It is not allowed to use this card if the user knows that his account does not have sufficient funds to pay for his purchase, as in that case the bank will pay and then charge him a penalty. Thus, the person will involve himself in the ribaa that has been forbidden by Allah and His Messenger. The only exception is if the person is certain that he will be able to supply the funds before there is any interest charge on this account.

Those cards that are processed and finalized immediately are acceptable for the purchase of gold and silver. However, those that are not of that nature may not be used for gold or silver because the purchase of a gold or silver must be a spot transaction, “hand to hand,”[6] where the exchange takes place immediately, which is a requirement for the soundness of those types of transactions.

Security Deposit Credit Card

If someone does not have a good enough credit history, some companies require the customer to deposit a specific amount of money in order to be issued a credit card. The individual must then pay his bills when he receives them while the security deposit stays with the company. At the end of the contract, which is usually one year, the company returns the security deposit, sometimes with an additional amount of money [of interest]. This card has the same ruling as the credit cards mentioned above. If the company returns more than the security deposit, then it is obligatory upon the Muslim to get rid of that additional amount by using it for the general welfare of the Muslims with the hope of being rewarded for staying away from what is forbidden.

Insurance

Commercial insurance, in all its various forms, as engaged in by contemporary insurance companies, is a form of invalid contract, as it contains much risk and even interest in some case. However, the mutual cooperative insurance that is done by Islamic insurance companies and the social insurance performed by the government and public institutions today are sanctioned by the Shareeah.

Commercial insurance is forbidden when it is the goal of the contract. However, if it is secondary to something else and not an independent contract, then it is not in the realm of the forbidden as secondary things may be overlooked while independent ones are not.[7]

The basis, in general, for the prohibition of insurance is the presence of gharar (high risk) and unknowable values. As such, it is permissible when there is a strong need for it until an Islamic alternative appears. This is because the prohibition of gharar is less than of ribaa, which is not exempted for except in the case of necessity.

Health insurance that is offered by commercial insurance companies is also an invalid form of contract. However, seeing that there is a strong need for such insurance in order to preserve life, which in itself is one of the goals of the Shareeah, an exemption is made for it according to the level of need and until an Islamic alternative becomes available.

Insurance on mosques and schools also falls under the category of general need in many instances. Hence, an exemption is made for it as well until an Islamic alternative becomes available.

Insurance that is part of an automobile purchase is also overlooked as what is secondary may be overlooked although it would not be overlooked as an independent contract. However, if the insurance contract is an independent contract, then it is not exempted unless it is required by need.

Insurance for lawyers’ services is also a general need for many people, especially after all the incidents related to people of Islam after 9-11. Thus, this is also exempted as determined by the need until an Islamic alternative becomes available.

Insurance for road side assistance, such as that given by AAA, is considered falling under general need, especially given the amount people travel in this country. An amount required by need would be exempted until an Islamic alternative becomes available, especially given the other services that these companies provide, such as maps and advice over the phone and so forth.

There is no harm in taking the insurance offered by employers to their employees as part of their benefits. This is part of the remuneration offered to employees and is acceptable as long as the employee does not have to sign on to that insurance contract independently.

There is no harm in taking insurance on purchased items, such as an automobile or electrical appliances, with the condition that they are in the same contract as the purchase of the item. If the insurance is in a separate, independent contract, it is not exempted unless there is a clear apparent need for it.

There is no harm in getting insurance for rental cars if the insurance is in the same rental agreement, even if the cost of the rental is increased due to the insurance. However, if the insurance is in a separate, independent contract, it is not exempted unless there is a clear apparent need for it.

There is no harm in insuring items that are shipped if the shipping company themselves offer the insurance service as part of the shipping contract. However, if the insurance is in a separate, independent contract, it is not exempted unless there is a clear apparent need for it.

The Role of Islamic Banks in Purchasing Homes in the United States

The workshop seconded the resolution of AMJA in its second conference that it is forbidden to purchase homes with interest-bearing loans, the type of which are usually found in the United States. They also emphasized that the arguments made to justify those interest-bearing contracts are unsound.

It is a must that the Islamic Banks working in the East take a role in this matter and rise up to help in solving the problem of purchasing homes in the United States as part of their investment portfolio.

Islamic Home Financing Companies in the United States

The workshop has delegated the discussion of the Islamic home financing companies in the United States to the Third Annual AMJA Conference that will be held in Sokoto, Nigeria and which will be attended, God willing, by the leading scholars of AMJA from various parts of the world who will study the research in detail and declare a resolution concerning the contracts of those companies.

[The papers and research were presented to AMJA and it was decided to delay the topic until the Fourth Annual AMJA Conference as many of the scholars who researched the topics were not able to attend and in order to increase the amount of research.]

An Honor Code for the Muslim Businessman

The following is a code of ethics for the Muslim businessman who wishes to exemplify and live up to the standards of the Shareeah in his transactions.

The Code of Ethics for the Muslim Businessman

I pledge to Allah, the Great, that I shall deal in my selling, buying and investments in only pure, permissible items. I shall strive to learn the Shareeah rulings that will help me in achieving that goal or I shall refer to the scholars to make sure that the contracts and investments I am involved in are proper. I also pledge to willingly and happily give my zakat. I also will not allow my business and work to keep me from the remembrance of Allah and the prayer. I also pledge that I will remain away from interest, risk-transactions, fraud, cheating and all other impermissible contracts and transactions. I also pledge to be of good character, honest, trustworthy, fair in dealings and fair in demanding rights.



[1] The prohibition of gharar is found in hadith recorded by Muslim (#2783), Abu Dawood (#2932), al-Tirmidhi (#1151), al-Nasaaee (#4442) and ibn Maajah (#2185).

[2] This practice has been prohibited in hadith recorded by al-Bukhari (#1991) and Muslim (#2808).

[3] Hadith about al-Eenah have been recorded by Abu Dawood (#303) and Ahmad (#4765). Ahmad Shaakir has graded these hadith to be authentic. Ibn al-Qayyim says that the report has two good chains to it that further strengthen each other. Al-Albaani has also declared it sahih in a number of places, including Saheeh al-Jaami (#423).

[4] Allah says, “Assist one another in acts of righteousness and piety and do not assist one another in acts of sin and transgression” (al-Maaidah 2).

[5] Recorded by Abu Dawood (#3040) and al-Tirmidhi (#1153) via Hakeem ibn Hizaam and it is a hasan hadith. Al-Tirmidhi also records it from Abdullah ibn Amr, calling it hasan sahih. Al-Nasaaee (#4523), ibn Maajah (#2178) and Ahmad (#14772) also record it. Al-Albaani has declared it sahih in Irwaa (#1292) and Silislat al-Saheehah (#1212).

[6] This is as is mentioned in a hadith recorded by al-Bukhari (#2031) and Muslim (#2965).

[7] This is based on the legal maxim mentioned by ibn Rajab in his Qawaaid which states, “Secondary issues are allowed to stand although they would not if they were independent.” Al-Suyooti mentioned it in al-Ashbaah wa al-Nadhaair, with the wording, “Secondary issues may be overlooked which would not have been overlooked under other circumstances.” Al-Hamawi mentions it in Ghamz Uyoon al-Absaar with the wording, “The secondary issues follow [the ruling of the primary issue].” Then he mentions a corollary which states, “The secondary issues does not have an independent ruling.”