Unlawful Gain and Legitimate Profit in Islamic Law: Riba, Gharar, and Islamic Banking

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Since the discovery of oil in the Middle East an increasing number of important contracts must be framed in accordance with the Shari'a. Moreover, various factors have helped to create among Muslims a more acute sense of an original Islamic identity and a collective feeling that Shari'a should govern their lives not only with regard to personal and family matters but also as a valid and reasonable corpus of commercial and civil laws. The ban on taking interest (riba) and the rejection of chance contracts (gharar) are two features of an Islamic law of contract which contrast with the secular man-made legal systmes of the West. This book is concerned with these two Islamic prohibitory rules and with the interest-free banking system which has developed therefrom. This new edition is updated and extended to cover the Shi'a Ja'fari fiqh. As a result all aspects are examined in the light of the teachings of the four Sunni schools — which hold authority in the Arab states and in Pakistan — of the Ibadis strongly present in Oman and of the Shi'a Ja'faris prevalent in Iran and largely present in Iraq, Bahrain, Kuwait, and Lebanon. The new edition will appeal to academics and practising lawyers, and it provides an insight into the religious ideological foundations claimed by Islamic banking. Foreword to the Second Edition Foreword to the First Edition INTRODUCTION: THE ISLAMIC ECONOMIC ORDER -Saudi Arabia -Kuwait -United Arab Emirates -Bahrain -Oman CHAPTER 1 RIBA (UNLAWFUL ADVANTAGE BY WAY OF EXCESS OR DEFERMENT) 1. The background of the Quranic prohibition -Earlier views on interest -The Quranic doctrine 2. Definitions -Riba -Genus and species -‘Illa 3. Various interpretations of ‘illa and genus -‘Illa -Genus 4. Traditional views on riba -Hanafis -Shafiis -Hanbalis -Malikis -Ja‘faris -Ibadis 5. Other views on riba -Ibn ‘Abbas -Ibn Qayyim -‘Abduh and Rida -Sanhuri -Daoualibi -Shaikh Draz -Zaydan Abu al-Karim Hassan 6. Shi‘a original views 7. Ribawi transactions with non-Muslims Appendix 1 Sources of the prohibition of riba CHAPTER 2 QARD (LOAN OF FUNGIBLE COMMODITIES) 1. Qard and riba 2. Repayment of a qard according to fiqh -What should be repaid to the lender, and where? -Is the lender entitled to derive any advantage from the qard? 3. Qard with a riba stipulation: valid or not? 4. Riba’s narrowed scope CHAPTER 3 GHARAR (UNCERTAINTY, RISK, SPECULATION) 1. Introduction 2. Definition of gharar 3. Avoiding want of knowledge (jahl) concerning the existence of the exchanged countervalues -The subject-matter in bilateral transactions -The effects of gharar on gratuitous contracts and unilateral transactions -Donation -Wills -Power of attorney -Sale of fruits and agricultural products -Istisna‘ (contract of manufacture) -The price 4. Avoiding want of knowledge (jahl) concerning the characteristics and quantities of the exchanged countervalues, and the date of future performance -Payment unavailable at the parties’ meeting -Subject-matter unavailable at the parties’ meeting: (1) bay‘ gha’ib -Subject-matter unavailable at the parties’ meeting: (2) bay‘ salam -Sale where subject-matter or price may be determined by viewing: bay‘ juzaf 5. Keeping effective control over the exchanged countervalues -Subject-matter -Price Appendix 2 Sources of the prohibition of gharar CHAPTER4 A FINANCIAL SYSTEM BASED ON ISLAMIC ETHICS 1. A short survey -The Islamic financial institutions 2. The operations traditional to fiqh revived by Islamic financial institutions -Musharaka or shartka -Murabaha -Expenses in relation to murabaha -Options when murabaha prices prove to be inflated -Ijara -Ijara wa-iqtina’ -Qard hasan -Takaful 3. The mudaraba (commenda partnership) -Definition -Mudaraba capital -Investor's duties and rights -Agent-manager’s duties and rights CONCLUSION: The unique character of the Sharia Law of Contract and the prospects for success of an Islamic banking system Glossary Bibliography Index