question: Ruling on helping someone who has repented from riba/interest/usury -based transactions by paying off his loan

210485: Ruling on helping someone who has repented from riba/interest/usury -based transactions by paying off his loan

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Is it permissible for me to pay off loans based on riba, as an act of charity to those who regret having gotten involved in interest? Or is it not permissible to pay off anything except the principal of the loan and not the riba?

Praise be to Allah.

If a person has repented from riba-based transactions, has resolved not to go back to them and regrets having done that, but he cannot avoid paying this interest, because the system obliges him to pay off the loans with the interest, otherwise he will be arrested and put in prison, then there is nothing wrong with helping him to pay off this debt and the resulting interest, and there is no sin on the one who helps him to do that, because this is helping to relieve a Muslim of distress. 

The Prophet (blessings and peace of Allah be upon him) said: Whoever relieves a Muslim of distress, Allah will relieve him of distress on the Day of Resurrection.

Narrated by al-Bukhaari (2442) and Muslim (2580). 

And because every time there is a delay in paying off the debt, the interest accumulates further. 

The scholars have stated that if a person who is in debt for something haraam repents to Allah, there is nothing wrong with giving him zakaah funds to pay off his debts. 

Shaykh Muhammad ibn ‘Uthaymeen (may Allah have mercy on him) said: 

Question: if a person is in debt for something haraam, can we give him zakaah?

Answer: If he has repented, we may give him, otherwise we do not give him,  because this comes under the heading of helping him with something haraam, hence if we gave to him, he would take out another loan.

End quote from ash-Sharh al-Mumti‘, 6/235 

Dr. ‘Umar Sulaymaan al-Ashqar said: If a person has got into debt by way of riba, it is not permissible to pay off his debt from zakaah funds allocated for debtors, unless he has repented and given up dealing in riba.

End quote from Abhaath al-Nadwah al-Khaamisah li Qadaayaa az-Zakaah al-Mu‘aasirah, p.210 

But in the case of one who has not repented from riba-based transactions, and only wants to solve his problem, and if his debt was paid off, he would not mind going back to dealing in riba again, then it is not permissible to help such a person to pay off his debt, because that comes under the heading of helping him in sin and transgression, which is not permissible. 

And Allah knows best.

link: http://islamqa.info/en/210485

question: Living in an apartment that his father bought by riba/interest/usury

105827: Living in an apartment that his father bought by riba

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My father deals with riba and has been withholding zakaah for 25 years, up till now, despite being told all this time that it is haraam. He has bought me a splendid apartment so that I can get married, and I suggested to him that I could live in the apartment by paying rent, so that I will not be using something that is haraam, but he vehemently refused that, so I am refusing to get married, so that I will not be a cause of increasing his sin. Is what I did right?

Praise be to Allah

Firstly: 

Riba is a major sin and a serious crime, and the one who deals in it is warned of a declaration of war from Allah and His Messenger, loss of blessing, and curses. A sin that is like this is something that one should flee from and keep far away from it by all possible means. 

Allah, may He be exalted, says (interpretation of the meaning): 

“Allah will destroy Riba (usury) and will give increase for Sadaqat (deeds of charity, alms, etc.) And Allah likes not the disbelievers, sinners”

[al-Baqarah 2:276]

“O you who believe! Fear Allah and give up what remains (due to you) from Riba (usury) (from now onward), if you are (really) believers.

And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279].  

Muslim (1598) narrated that Jaabir (may Allah be pleased with him) said: The Messenger of Allah (blessings and peace of Allah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

The interest that is paid by riba-based banks is the very essence of riba. If a person is compelled by necessity to keep his money in a riba-based bank, then he should keep it in a current account. If a person has repented from dealing in riba and he receives any interest payments, it is obligatory for him to get rid of it by spending it on charitable causes, and it is not permissible for him to keep it for himself. 

Withholding zakaah is also a major sin, but despite that it is not haraam to interact with a person who withholds zakaah or to accept his gift, because zakaah is a debt that he owes, but his wealth is not like the wealth that was seized by force or stolen, which it is haraam to take for the one who knows that it is stolen. 

Secondly: 

The correct scholarly view is that that which is haraam because of the way in which it is acquired is only haraam for the one who acquired it in that manner, and it is not haraam for the one who takes it from him in a way that is permissible, such as receiving it as a gift and the like. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: 

Some of the scholars said: With regard to that which is haraam because of the way in which it is acquired, the sin thereof is borne only by the one who acquired it in that manner, not by the one who takes it from him in a permissible manner. This is in contrast to that which is haraam in and of itself, such as alcohol, property that was seized by force, and the like. This is a strong view, based on the evidence that the Messenger (blessings and peace of Allah be upon him) bought food from the Jews for his family, and he ate from the sheep that was given to him as a gift by the Jewish woman in Khaybar, and he accepted the invitation of a Jewish man, and it is well-known that most of the Jews take riba (usury) and deal in haraam wealth. This view may be further strengthened by the fact that the Prophet (blessings and peace of Allah be upon him) said concerning the meat that was given in charity to Bareerah (and she gave some of it to the Prophet (blessings and peace of Allah be upon him)): “For her it is charity and for us it is a gift.”

End quote from al-Qawl al-Mufeed ‘ala Kitaab at-Tawheed (3/122) 

He also said:

With regard to that which is haraam because of the way in which it is acquired, such as that which is taken by way of bribes, or by way of riba, or by way of lying, and the like, it is haraam for the one who  acquired it in that manner, but it is not haraam for the one who acquires it from him in a permissible manner. This is supported by the fact that the Prophet (blessings and peace of Allah be upon him) used to deal with the Jews even though they used to consume haraam wealth and take riba. This indicates that it is not haraam for anyone other than the one who acquired it by haraam means.

End quote from Tafseer Soorat al-Baqarah (1/198) 

Based on that, if a father buys an apartment for his son with riba money, there is nothing wrong with the child making use of it, because the sin of riba is only on the one who acquired it in that manner. 

It may be said to the son in this case: If your refusal to live in this apartment will not have any impact by making your father give up riba – rather it will only make him angry and sad, and he will carry on with that – then there is nothing wrong with you getting married and living in that apartment. 

Thirdly: 

If a person deals in riba then repents to Allah, may He be exalted, if the riba wealth is still there, then he has to rid himself of it, but if he has used it up and consumed it, then he does not have to do anything with regard to it. 

If he put that money into accommodation that he needs, he does not have to sell it and get rid of the riba, unless he chooses to do so himself, which is undoubtedly better. This is by way of making it easy to repent for those who have committed sins, because if they were to be told: Get rid of whatever you possess of everything that you purchased by means of riba, that would cause them hardship and would cause many of them to delay repentance. 

Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said: A man may live for a long time without praying or giving zakaah, or fasting, and not caring how he acquires his wealth, whether it is from halaal or haraam sources, and not following the guidelines on marriage and divorce, and so on, so he is living in a state of ignorance, apart from the fact that he claims to be a Muslim. When Allah guides him and has mercy upon him by enabling him to repent, if he were obliged to make up all that he had missed of obligatory duties, and if he were to be ordered to return everything that he had acquired of wealth, and to give up everything that he loves, and so on, repentance would become a punishment for him, and in that case disbelief would be dearer to him than Islam, which he has identified with, because repentance from disbelief would be a mercy but repentance when he is already a Muslim would be a punishment. I know some righteous people who wished that they had been disbelievers so that they could become Muslims and be forgiven for all their previous misdeeds, because repentance for them was impossible or too difficult, according to what they had been told about repentance and what they believed about it. Moreover, this deters most of those who commit evil deeds from repenting, and it is more like causing the people to despair of the mercy of Allah, and placing a heavy burden on those who repent, who are the loved ones of Allah, for Allah loves those who repent and He loves those who purify themselves, and Allah rejoices over the repentance of His slave more than the one who finds his property in which is his means of survival after having despaired of ever finding it again. 

End quote from Majmoo‘ al-Fataawa (22/21) 

Our advice to this son is to continue honouring his father and reminding him of the prohibition on riba and the obligation to hasten to give it up. He should also hasten to get married so long as he is able to do so, so as to protect himself and guard against temptation.

We ask Allah, may He be exalted, to set straight the affairs of all. 

And Allah knows best.

link: http://islamqa.info/en/105827

question: Some types of haraam transactions

103149: Some types of haraam transactions

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What are the types of haraam transactions? Please quote the evidence for that.

Praise be to Allaah.

There are many types of haraam transactions, and it is not possible to list them all in this brief answer. On our website, in the section on haraam transactions you will find many of these transactions. 

Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) mentioned a useful principle concerning this matter, which will help one to understand the issue and by referring to it the issue will become clear. 

He (may Allah have mercy on him) said in Majmoo‘ al-Fataawa (29/22): 

The second principle concerning contracts, both halaal and haraam: the basic principle in this regard is that Allah has forbidden us in His Book to eat up one another’s property unjustly (cf. 2:188); He condemned the rabbis and monks who ate up the people’s wealth unjustly; He condemned the Jews for consuming usury (riba) when they had been forbidden to do so, and for eating up the people’s wealth unjustly. This includes everything that is eaten up or consumed unjustly in transactions and donations, and whatever is taken without consent. 

Eating up or consuming wealth unjustly in transactions is of two types, which Allah mentioned in His Book. They are usury (riba) and gambling. 

The prohibition on usury, which is the opposite of charity, is mentioned at the end of Soorat al-Baqarah, Soorat Aal ‘Imraan and ar-Room. The Jews are condemned for it in Soorat an-Nisa’, and the prohibition on gambling is mentioned in Soorat al-Maa’idah. 

Then the Messenger of Allah (blessings and peace of Allah be upon him) explained in detail that which Allah had mentioned in general terms in His Book. The Prophet (blessings and peace of Allah be upon him) forbade ambiguous transactions, as was narrated by Muslim and others from Abu Hurayrah (may Allah be pleased with him). Ambiguous transactions are those of which the outcome is unknown, which leads to the same negative outcomes as gambling, namely enmity and resentment, in addition to consuming wealth unlawfully, which is a type of oppression or wrongdoing. Ambiguous transactions involve wrongdoing, enmity and resentment. 

As for usury, the prohibition on it in the Qur’an is more emphatic. Hence Allah, may He be exalted, says (interpretation of the meaning):

“O you who believe! Be afraid of Allah and give up what remains (due to you) from Riba (usury) (from now onward), if you are (really) believers.

And if you do not do it, then take a notice of war from Allah and His Messenger”

[al-Baqarah 2:278-279]. 

The Prophet (blessings and peace of Allah be upon him) included it among the major sins, as was narrated in as-Saheehayn from Abu Hurayrah (may Allah be pleased with him). Allah stated that some good things that had been permitted to the Jews became forbidden to them because of their wrongdoing, their preventing people from following the path of Allah, and their consuming people’s wealth unlawfully. And He, may He be glorified and exalted, said that He will destroy riba (usury) as He gives increase for charity (cf. 2:276). Both matters are tried, tested and true in people’s experience. End quote. 

So the basic principle is that any transaction that includes either of these two forbidden matters – usury (riba) or gambling – or that is a trick to get around the prohibition on these two things, comes under the heading of haraam transactions. 

Examples of transactions that are haraam because of usury (riba) include: ‘Eenah transaction [which means to sell something for a price to be paid at a later date, then to buy it back for a lower price to be paid immediately]; selling debts; combining a sale contract with a loan; and the like. 

Examples of transactions that are haraam because of gambling include: sales of unknown items; and sales of things that one cannot deliver. 

See the answer to question no. 105339 

And Allah knows best.

link: http://islamqa.info/en/103149

question: job in companies related to ribaa/interest/usury

11315: He works as an accountant in a company where he writes down the calculations for ribaa/interest/usury

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An accountant works balancing the books for a company. He writes down the figures and calculates the expenses and profits, etc… Among the figures which the accountant write down is the amount of interest – in figures – which the company takes from the bank in return for the balance in their account. He does not deposit anything in the bank and he does not ask the bank for the ribaa (interest). But he calculates all the figures for the company – only by writing them down – such as wages etc. and the price of raw materials, and this figure is included in that. Is simply writing down this figure in the final statement haraam?

Praise be to Allaah. 

We put this question to Shaykh Muhammad ibn Saalih al-‘Uthaymeen, may Allaah preserve him, who replied:

  Yes (it is haraam), because it is included in the general meaning of the hadeeth: the Prophet (peace and blessings of Allaah be upon him) cursed the one who consumes ribaa, the one who gives it, the two who witness it and the one who writes it down.”

  And Allaah knows best.

link: http://islamqa.info/en/11315

108105: Working in an audit firm reviewing accounts which involve riba, insurance and taxes

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I am working as a trainee in an audit firm. The purpose of an audit is to check the financial statements prepared by companies and report whether they present a true and fair view. In order to achieve this purpose we have to check the financial records from which the financial statements have been prepared and also the accounting process and calculations carried out by companies. These companies are involved in activities such as obtaining interest-based loans, having insurance and paying tax. Such activities exist in all kinds of companies even if their business itself is halal e.g. manufacturing companies. This means that we are obliged to check the accounting for interest, insurance and tax, without which we cannot give our report. My question is, is it lawful to perform audit?.

Praise be to Allaah.

It is not permissible to audit riba-based accounts, because that involves approving of riba, writing it down and keeping silent about it. Muslim narrated in his Saheeh (1598) that Jaabir (may Allaah be pleased with him) said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

The scholars of the Standing Committee for Issuing Fatwas were asked:  

In the office of a legal accountant, we check the financial statements of institutions and companies, based on the company’s books, with the aim of submitting the results at the end of the financial year in the form of budgets and reports about the company’s financial situation, to be presented through the institution to a government department or bank, or to the zakaah and income departments. During the year we also keep watch on the finances of the institution to guard against tampering and embezzlement. I have a number of questions which I hope that you can answer: 

(a)

In some cases, I may see details of their accounts and dealings with the banks. These accounts show debt i.e., the companies are required to produce them in order to get a loan from this bank or as the result of withdrawing more than they have in their account, which results in the bank charging interest for that, i.e. riba. The nature of our work involves showing this account with the others in the budget. That is based on the company’s books and bank accounts, and we cannot exclude it from the rest of the accounts. It has to be shown in order for the budget to be regarded as showing the real situation of the company. Is there any sin on us in that, and are we regarded as those who witness riba? 

They replied: 

It is not permissible for you to be an accountant because of what you have mentioned in your question, because that involves cooperating in sin and transgression. End quote. 

Fataawa al-Lajnah al-Daa’imah (15/20) 

Shaykh ‘Abd al-‘Azeez ibn Baaz, Shaykh ‘Abd al-Razzaaq ‘Afeefi, Shaykh ‘Abd-Allaah ibn Ghadyaan.  

So you should look for work where you will not have to deal with accounts of riba. 

With regard to insurance and taxes, if they are compulsory, then there is nothing wrong with calculating and auditing them, because the one who pays them is excused for doing so. 

We ask Allaah to make easy for you the means of earning halaal provision and to bless it for you. 

And Allaah knows best.

link: http://islamqa.info/en/108105

118189: Working in auditing offices when there is riba in the companies’ accounts

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What is the ruling on working in auditing offices, knowing that the job of the auditor is to check the company's accounts and budgets which may contain records of bank accounts or interest (riba), but he is not the one who wrote these accounts or dealt with them at all; rather he is only reviewing or checking them? All of that is for the purpose of issuing a report on the extent to which this organisation is adhering to international guidelines with regard to the outcome of its activities and to issue financial records.

Praise be to Allaah.

It is not permissible to review or audit riba-based accounts, because that involves recording riba and remaining silent about it and approving it. Muslim narrated in his Saheeh (1598) that Jaabir (may Allaah be pleased with him) said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

The scholars of the Standing Committee for Issuing Fatwas were asked: I have a legal accounting business, in which we review the financial statements of institutions and companies, from the accounting records kept by the company. The purpose is to show the results of the review at the end of the financial year in the form of budgets and reports on the financial situation of the company, so that it may be submitted via the company to one of the government departments or banks or to the Department of zakaah and income. Similarly, throughout the year we keep an eye on the company’s finances so as to guard against tampering and fraud. I have some questions which I hope that you will answer: 

1-     When reviewing the company’s books, I may see some of the accounts that the company have with the banks, and these accounts may show loans, i.e., the company owes money as a result of getting a loan from the bank or as a result of being overdrawn, which means that the bank starts charging interest on that, i.e., riba. The nature of our work is to show these figures alongside other items in the budget, and this is based on the books and records of the company, and bank statements, and we cannot omit it from the other accounts; we have to show it so that the budget reflects the real situation of the company. Is there any sin on us for that, and are we regarded as witnesses to riba?  

They replied: It is not permissible for you to be an accountant dealing with what you mentioned in the question, as that involves cooperating in sin and transgression. End quote. 

Shaykh ‘Abd al-‘Azeez ibn ‘Abd-Allaah ibn Baaz, Shaykh ‘Abd al-Razzaaq ‘Afeefi, Shaykh ‘Abd-Allaah ibn Ghadyaan. 

Fataawa al-Lajnah al-Daa’imah, 15/20 

They were also asked: What is meant by the one who writes down riba in the hadeeth of Jaabir which was narrated by Muslim, where it says that the Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same? Is the one who writes down riba the one who recorded it at the time only, or can it be someone else who has nothing to do with the riba-dealing institution, except that as an accountant he adds and subtracts figures in other books, apart from the riba documents, as he is obliged to do that? Is that accountant regarded as writing down riba, or does this phrase apply only to the one who writes it down at the time and no one else, and does the curse not extend to anyone else? 

They replied: The hadeeth of the curse on the one who writes down riba is general in meaning and includes the writer of the original document, the one who copies it if it wears out, the one who writes the figure in accounting books and the accountant who works out the rate of interest and adds it to the original amount or sends it to the one who deposited it, and so on. And Allaah is the source of strength; may Allaah send blessings and peace upon our Prophet Muhammad and his family and Companions. End quote. 

Fataawa al-Lajnah al-Daa’imah (15/5).  

You should note that the ways of earning halaal provision are many, so seek and strive, and beware of consuming haraam wealth, for every body that is nourished from haraam sources, the Fire is more befitting for it. 

We ask Allaah to help and guide us and you. 

And Allaah knows best.

link: http://islamqa.info/en/118189

Question: Riba is haraam for the one who takes it and the one who pays it, and it is haraam to help with it in any way whatsoever

202904: Riba/interest/usury is haraam for the one who takes it and the one who pays it, and it is haraam to help with it in any way whatsoever

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In one of the questions on your website you stated that working in an auditing office that deals with customers who are involved in some riba-based transactions is not permissible, and you quoted the hadeeth of the Prophet (blessings and peace of Allah be upon him) in which he cursed four categories of people, including the two who witness riba and the one who writes it down. But some commentators on the hadeeth, such as al-Haafiz ibn Hajar, said: This only applies to the one who helps the one who is engaging in riba; as for the one who writes it down or witnesses what happens so as to ensure the rights of both parties, his intentions are good and he is not subject to the warning mentioned; rather it applies only to the one who helps the one who engages in riba by writing it down and witnessing it. In the commentary of al-Abi on Saheeh Muslim, it says: What is meant by the one who writes it down is the one who writes the document, and what is meant by the one who witnesses it is the one who witnesses it and supports the deal. They are equally subject to the curse because the contract cannot be done except with all of them.
What is the evidence for the view of the scholars (apart from Ibn Baaz) that the hadeeth is general in meaning and applies to all of them, those who help and those who do not?

Praise be to Allah.

Firstly: 

Auditing the accounts of customers who deal with riba is haraam work, because it involves approving of riba, writing it down, and keeping quiet about it and not denouncing it. 

Please see the answers to questions no. 108105, 118189 and 175492. 

Secondly: 

Muslim (1598) narrated that Jaabir said: The Messenger of Allah (blessings and peace of Allah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: 

That is, (they are all the same) in terms of being cursed, because they co-operated in that.

End quote from Fataawa Noor ‘ala ad-Darb, 16/2 

Imam al-Bukhaari (may Allah have mercy on him) referred to this hadeeth that was narrated by Imam Muslim in the title which he gave to a chapter of his Saheeh, which he called: Chapter on the one who consumes riba, the one who witnesses it and the one who writes it down. 

Then he quoted two hadeeths in this chapter, one of which was the hadeeth of ‘Aa’ishah: When the last part of al-Baqarah was revealed, the Prophet (blessings and peace of Allah be upon him) recited it, then he forbade trade in alcohol. The second hadeeth is the hadeeth of Samurah, according to which the Prophet (blessings and peace of Allah be upon him) said: “Last night, I dreamt that two men came to me and took me out to a sacred land, then we set out until we came to a river of blood in which a man was standing, and on the bank of the river there was another man in front of whom were some rocks. The man who was in the river came, and when he wanted to get out, the (other) man threw a rock in his mouth, and sent him back to where he had been. Every time he came and wanted to get out, he threw a rock into his mouth and sent him back to where he had been. I said: ‘What is this?’ He said: ‘The one who you saw in the river is the one who consumed riba.’ 

Al-Haafiz Ibn Hajar (may Allah have mercy on him) said: 

Ibn at-Teen said: There is no mention in these two hadeeths of the one who writes down riba and the one who witnesses it. My response is that he mentioned them by implication because they help the one who consumes it to do so. This only applies to the one who helps the one who is engaging in riba. As for the one who writes it down or who witnesses the deal in order to tell exactly what happened, this is a good intention and is not included in the warning mentioned. Rather what is included is the one who helps the one who is engaging in riba by writing it down and witnessing it; his status is the same as that of the one who says “Trading is only like Riba (usury)” [al-Baqarah 2:275]. End quote. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: 

The one who helps another to commit sin will incur a burden of sin as much as he deserves. It is proven that the Prophet (blessings and peace of Allah be upon him) cursed the one who consumes riba, the one who pays it, the two who witness it and the one who writes it down, because the two witnesses and the one who writes it down are helping to confirm this transaction, so they incur whatever they deserve of the curse. 

End quote from al-Liqa’ ash-Shahri, 35/24 

In fact what we have previously affirmed on our website does not differ in the slightest from what we have quoted here and what the questioner has quoted from al-Haafiz Ibn Hajar or from al-Abi (may Allah have mercy on them both). 

Auditing bank accounts or the accounts of riba-based companies comes under the heading of helping in the haraam riba transaction and participating in it; it is not possible to complete riba-based deals without the help of accountants. 

But there remain these two forms that are not included in haraam writing down or witnessing: 

1.

Where one witnesses or writes down the deal in order to document it and testify to the involvement of the people who are party to it, as was mentioned by al-Haafiz Ibn Hajar (may Allah have mercy on him). This is like one who sees a crime such as murder or theft taking place, so he takes pictures, or he writes down what happened, so that he may give testimony concerning it before the judge and help to catch the perpetrator and help justice. This person has nothing to do with the criminal act and therefore has nothing to do with the perpetrator. And he is not helping with the sin or crime in any way whatsoever; rathe, in fact he was striving to change evil and establish justice to the best of his ability. 

This is what al-Haafiz Ibn Hajar (may Allah have mercy on him) was referring to, and in our previous answers we were not suggesting that this kind of action is haraam; rather it is something that is Islamically prescribed and is necessary.

 2.

Where a person or company or accounts department enters into a transaction with another person or company or firm that deals with riba or other haraam transactions, but the first party has nothing to do with its haraam actions; rather he or they are dealing with them within the limits of permissible transactions and contracts. 

For example, the company may be dealing with riba-based transactions, but my job is supervising a permissible project that does not involve any riba-based transactions, or their riba-based transactions are between them and the bank, and someone else takes care of dealing with customers, buying and selling and so on, which has nothing to do with the riba-based transactions. In such cases, there is no blame on the one who deals with the company or plays any part in it. We have never disallowed this type of involvement before; rather we stated clearly that this is permissible 

Shaykh Ibn ‘Uthaymeen said: 

It is permissible for a person to deal with someone who deals with riba, but his interactions with him are done in a sound manner. For example, it is permissible to buy goods from this man who deals in riba, and it is permissible to borrow money from him, and there is nothing wrong with that. The Prophet (blessings and peace of Allah be upon him) used to interact with the Jews, even though they used to consume haraam wealth; he used to accept their gifts and invitations, and he bought and sold with them too. 

To sum up: if a person earns money from haraam sources but you deal with him in a permissible transaction, there is no blame on you for doing so.

End quote from Fataawa Noor ‘ala ad-Darb, 16/2 

See also the answers to questions no. 171145 and 11315 

And Allah knows best.

link: http://islamqa.info/en/202904

Question: যিনি এমন কোন প্রত্যয়নপত্র লিখেন যা দিয়ে সুদী ঋণ পাওয়া যায়,এমতাবস্থায়, প্রত্যয়নপত্র ইস্যুকারী ব্যক্তি গুনাহগার হবেন কি না?

59864: যিনি এমন কোন প্রত্যয়নপত্র লিখেন যা দিয়ে সুদী ঋণ পাওয়া যায়,এমতাবস্থায়, প্রত্যয়নপত্র ইস্যুকারী ব্যক্তি গুনাহগার হবেন কি না?

প্রশ্ন: জনৈক ব্যক্তি সরকারের অর্থ বিভাগে চাকুরী করেন। তাঁর দায়িত্ব হচ্ছে- কর্মকর্তা-কর্মচারীদের বেতন ও অন্যান্য আর্থিক প্রক্রিয়াগুলো সম্পাদন করা। এর মধ্যে রয়েছে কর্মকর্তা-কর্মচারীদের আবেদনের পরিপ্রেক্ষিতে তাদেরকে স্ব স্ব বেতন সম্পর্কে একটি প্রত্যয়নপত্র প্রদান করা। তাদের কেউ কেউ এই প্রত্যয়নপত্রটি সুদী ব্যাংক থেকে ঋণ নিতে ব্যবহার করে থাকেন। এমতাবস্থায়, প্রত্যয়নপত্র ইস্যুকারী ব্যক্তি গুনাহগার হবেন কি না? উল্লেখ্য, এটা তার অফিসিয়াল দায়িত্ব।

সমস্ত প্রশংসা আল্লাহর জন্য।

 কর্মকর্তা-কর্মচারীদের আবেদনের পরিপ্রেক্ষিতে ‘বেতন-প্রত্যয়নপত্র’  ইস্যু করতে দোষের কিছু নেই। তবে সে প্রত্যয়নপত্রটি যদি ঋণ পাওয়ার জন্য কোন সুদী ব্যাংককে সম্বোধন করে লেখা হয় তাহলে এ ধরনের প্রত্যয়নপত্র প্রদান করা জায়েয নেই। যেহেতু এটি আল্লাহর অবাধ্যতার ক্ষেত্রে সহযোগিতা করা; বরং একটি কবিরা গুনাহর কাজে সহযোগিতা করা। 

 ফতোয়া বিষয়ক স্থায়ী কমিটির সদস্যগণকে এমন একজন কর্মকর্তা সম্পর্কে প্রশ্ন করা হয়েছিল যিনি কোন একটি ইউনিভার্সিটির টাইট রাইটার হিসেবে কর্মরত আছেন বিধায় উক্ত ইউনিভার্সিটির কর্মকর্তা-কর্মচারীদের সুদী ব্যাংকে ঋণ প্রাপ্তির নিমিত্তে প্রদত্ত প্রত্যয়নপত্রগুলো টাইপ করেন থাকেন। তাঁর এ কাজটি কি জায়েয?

 জবাবে তাঁরা বলেন: এই প্রত্যয়নপত্র টাইপ করা ও প্রদান করা জায়েয নয়। যদি প্রত্যয়নপত্র ইস্যুকারী ও টাইপকারী জানেন যে, যার জন্য এ পত্রটি ইস্যু করা হচ্ছে তিনি সুদী লেনদেনের ক্ষেত্রে এই প্রত্যয়নপত্রটি ব্যবহার করবেন। যেহেতু এ বিষয়ে নবী সাল্লাল্লাহু আলাইহি ওয়া সাল্লামের উদ্ধৃত হাদিসটির বিধান সাধারণ। তিনি সুদ গ্রহীতা, সুদদাতা, সুদের লেখক ও সাক্ষীদ্বয়কে লানত করেছেন। তিনি বলেছেন, তাদের সকলের পাপ সমান। [সহিহ মুসলিম] এবং যেহেতু এ বিষয়ে আল্লাহ তাআলার বাণীর বিধানও সাধারণ “সৎকর্ম ও খোদাভীতিতে একে অন্যের সাহায্য কর। পাপ ও সীমালঙ্ঘনের ব্যাপারে একে অন্যের সহায়তা করো না। আল্লাহকে ভয় কর। নিশ্চয় আল্লাহ তা’আলা কঠোর শাস্তিদাতা।”[সূরা মায়েদা, আয়াত: ০২]

 আল্লাহই ভাল জানেন।  
link: http://islamqa.info/bn/85191

Question: working in the banks that deal with Riba /Interest/usury?

26771: Working in banks in an Islamic country

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Is it permissible to work in the banks that exist in Islamic countries that deal with riba?
My husband works in one of the banks that deal with riba, and he works as a systems operator on programs that have to do with technological and information management. His main job is to ensure that all the computer systems are working correctly, and installing new systems, and assisting the bank employees.
I know that interest is haraam, and that it is a major sin, but I have heard many opinions about working in banks, one of which I have heard is that “if your work is not directly involved with interest, and the bank has other sources of income apart from interest, then it is permissible to work in the bank.
This is the only source of income that we have been living on up till now. I hope that you can tell us whether the income we have gotten from this job is haraam or not.

Praise be to Allaah.  

We ask Allaah to reward you with good for your keenness and efforts to find out the truth, and to help your husband to find permissible employment in which there is no sin. 

Note that it is not permissible to work in riba-based banks at all, because that involves consuming riba, or writing it down, or witnessing it, or helping those who do that. 

The major scholars have issued fatwas stating that working in riba-based banks is haraam, even if the job does not involve dealing with riba as such, e.g. guards, cleaners and other services. We will quote to you some of their fatwas, whilst also pointing out that your husband’s work is strongly connected to riba and to recording and documenting it, because as you say, his main job is to ensure that all the computer systems are working correctly, and installing new systems, and assisting the bank employees. 

It says in Fataawa al-Lajnah al-Daa’imah, 15/41: 

It is not permissible for a Muslim to work in a bank that deals with riba, even if the work that the Muslim does has nothing to do with riba, because he is giving the employees who do work with riba with what they need and he is helping them with their calculation of interest. Allaah says (interpretation of the meaning): 

“but do not help one another in sin and transgression”

[al-Maa’idah 5:2] 

The Standing Committee (15/38) was asked: what is the ruling on working in the existing banks? 

They replied: 

Most of the transactions that are done nowadays involve riba, which is haraam according to the Qur’aan and Sunnah and the consensus of the ummah. The Prophet (peace and blessings of Allaah be upon him) ruled that whoever helps the one who consumes riba or pays it by writing it down for him or bearing witness to it, etc, is a partner of the one who consumes it and the one who pays it, and they are all cursed and expelled from the mercy of Allaah. In Saheeh Muslim and elsewhere it is narrated that Jaabir (may Allaah be pleased with him) said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba, the one who pays it, the one who writes it down and the two who witness it, and he said, “They are all the same.”  

Those who work in banks are helping the owners of the banks by administering their operations, whether in writing or bearing witness, or transferring papers or handing over money, or doing other things that help those who deal in riba. Hence it is known that working in an existing bank is haraam. The Muslim should avoid that and should try to earn a living in a way that Allaah has permitted; and there are many such ways. He should fear Allaah his Lord, and not expose himself to the curse of Allaah and His Messenger. 

And the Standing Committee (15/55) was asked: 

(a)   Is working in banks, especially in Muslim countries, halaal or haraam?

(b)  Is there any specific section of the bank that is halaal, as many think, and if that is correct could you explain further? 

They replied: 

Firstly: working in banks that deal with riba is haraam, whether that is in a Muslim country or a kaafir country, because it involves cooperating in sin and transgression, which Allaah has forbidden as He says (interpretation of the meaning): 

“but do not help one another in sin and transgression”

[al-Maa’idah 5:2] 

Secondly: There is no section in the riba-based bank that is exempt from this ruling according to what we know of the pure sharee’ah, because all the bank employees are cooperating in sin and transgression. 

And the Standing Committee (15/18) was asked: 

What is the ruling on working as a maintenance engineer for one of the electronics companies that deal with some of the riba-based banks, where the company sells equipment (calculators, cameras, telephones) to the bank, and tells us, as maintenance engineers, to go to the bank to service this equipment on a regular basis?  Is this work haraam on the basis that the bank does its accounts and organizes its work on these machines, and are we thus helping them in sin? 

They replied: 

It is not permissible for you to work for companies that are as you described, because that involves cooperating in sin and transgression. 

And it says in Fataawa al-Lajnah al-Daa’imah (15/48): 

It is not permissible for a Muslim to work in banks that deal with riba, because that involves helping them to engage in riba-based transactions in one way or another, by writing them down, witnessing them, guarding the bank, etc. Helping them in that manner is cooperating in sin and transgression, which Allaah forbade when He said (interpretation of the meaning): 

“but do not help one another in sin and transgression”

[al-Maa’idah 5:2] 

Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) was asked: is it permissible to work for a riba-based organization as a driver or guard? 

He replied: 

It is not permissible to work for a riba-based organization even if you are a driver or a guard, because accepting employment with a riba-based organization implies that you approve of them, as whoever denounces something could not work to serve its interests. If he works to serve its interests, he must approve of it, and the one who approves of something haraam has a share in its sin. With regard to those who are directly involved in writing down transactions, transferring money, depositing money, etc, are undoubtedly dealing directly with something that is haraam. It was proven from the hadeeth of Jabir (may Allaah be pleased with him) that the Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba, the one who pays it, the one who writes it down and the two who witness it, and he said, “They are all the same.” 

From Fataawa Islamiyyah, 2/401 

And there are other well-known fatwas which forbid working in riba-based banks, no matter what the kind of work involved. Based on this, your husband has to repent to Allaah from what he has done in the past, and leave this work, seeking the help of Allaah, putting his trust in Him and being certain that He will grant him provision. Allaah says (interpretation of the meaning):

 “And whosoever fears Allaah and keeps his duty to Him, He will make a way for him to get out (from every difficulty).

And He will provide him from (sources) he never could imagine. And whosoever puts his trust in Allaah, then He will suffice him. Verily, Allaah will accomplish his purpose. Indeed Allaah has set a measure for all things”

[al-Talaaq 65:2-3] 

We ask Allaah to make us independent by means of that which is halaal so that we will have no need of that which is haraam.

Original Link: http://islamqa.info/en/26771

Economic and Financial system, Financial markets and Islamic applications

Class Lecture

Islamic Financial System (Fin-5402)

Economic and Financial system, Financial markets and Islamic applications

Economic system:

An economic system is a collection of institutions set up by society to deal with the allocation of resources, production and goods and services, and the distribution of the resulting income and wealth.

Islamic Economic system:

A collection of institutions (that is, formal and informal rules of conduct and their enforcement characteristics) designed by the Law-Giver (that is, Allah (swt) through the rules prescribed in the Qur’an, operationalized by the sunnah of the Prophet (pbuh) and extended to new situations by ijtihad) to deal with allocation of scarce resources, production and the exchange of goods and services and the distribution of the resulting income and wealth.

Types of economy:

1.      Market/Capitalist Economy: is one in which individuals and private firms make the major decision about production and consumption Market economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Example-UK (came to close in 18^th century).

2.      Laissez – faire economy: the extreme case of a market economy, in which Governments keeps its hands off economic decisions, is called a Laissez – faire economy.

3.      Command/Planned/Centralized/Communist/Socialist Economy: is one in which the government makes all important decisions about production and consumption. Example-ex-soviet union

4.      Islamic Economy: the economy which runs according to the law of welfare, justice and Islamic Shariah. Example-Medina state in 7^th century, Iran (came to close).

5.      Mixed Economy: it includes the elements of both market and command economy. Example-almost all economy of the world, Bangladesh, India etc

Comparative analysis of different doctrines:

Figure-1: Economic Doctrines of life

Capitalism	Communism	Islam
Worldly life & confused about Hereafter life	worldly life is the only life & no Hereafter life	Worldly life & Hereafter life
There is a GOD but forget in daily life	There is no GOD or creator	ALLAH is the only creator and God
Self-satisfaction	Self-satisfaction through state intervention	Satisfaction of ALLAH
Self-interest &Rationalism is the sole authority of decision making	Rationalism and state is the sole authority of decision making	Individualism &Rationalism through moral filtering is a part of  decision making
Competitive market: survival for the fittest	State control the market	Combination of competition and state intervention: Humanity & Philanthropy
No value judgment	No value judgment	Value judgment, social, national, cultural values
Independent of revealed religion, Religion is unreliable	No religion	Religion is key determinant
Earning at any way	Earning at any way	Earning at honest way
Economic Laws are like physical laws	Economic Laws are like physical laws	Economic laws are like natural laws
Economics is a positive science as like as biology, physics which have no value, value neutral	Economics is a positive science as like as biology, physics which have no value, value neutral	Economics is value oriented. Permissible & prohibition have to be observed
Little concern for poor humanity	Theoretically, concern for poor humanity but not practically	Major concern for poor. Poverty alleviation by Zakat, Sadaqa & gives emphasis on economic progress

Figure-2: Stages of life and difference in Visions of two consumers (Schematic chart)

Islamic  man	Conventional man
Born (coming from Heavenly life) ↕ Education life (worldly+ Religious) ↕ Working/professional life (earning an honest way directed by Religion) ↕ Family life (Religious) ↕ Life Style (Moderate/simple life style) ↕ Worldly life (Enjoy the worldly life & Prepare for Hereafter life) ↕ Retired life (reading, travelling, Ibadah, etc.) ↕ Death (start the journey for Hereafter life )	Born (Natural Law of human life) ↕ Education life (worldly) ↕ Working/professional life (earning an any way) ↕ Family life (Wealth) ↕ Life Style (Luxurious life style) ↕ Worldly life (Enjoy the worldly life-Only place for success & rewards) ↕ Retired life (reading, travelling, etc.) ↕ Death (Natural departure)

Financial system:

A financial system consists of institutional units and markets that interact, for the purpose of mobilizing funds for investment and providing facilities, including payment systems, for the financing of commercial activity.

An institutional unit is an entity, such as a household, corporation, or government agency, that is capable in its own right of owning assets, incurring liabilities, and engaging in economic activities and transactions with other entities.

The role of financial institutions within the system is primarily to intermediate between those that provide funds and those that need funds, and typically involves transforming and managing risk. Particularly for a deposit taker, this risk arises from its role in maturity transformation, where liabilities are typically short term (for example, demand deposits), while its assets have a longer maturity and are often illiquid (for example, loans). Financial markets provide a forum within which financial claims can be traded under established rules of conduct and can facilitate the management and transformation of risk. They also play an important role in identifying market prices (“price discovery”).

Structure of Financial System: The main constituents of financial system are:

1.      Financial Institutions

2.      Financial Instruments, and

3.      Financial Markets.

1.      Financial Institutions

The modern name of Financial Institution is Financial Intermediary (FI), because it mediates or stands between ultimate borrowers and ultimate lenders and helps transfer funds from one to another. The Financial system helps production, capital-accumulation and growth by encouraging savings and allocating them among the alternative uses and users.

Overview of Financial system of Bangladesh 

The financial system of Bangladesh is comprised of three broad fragmented sectors:

1.      Formal Sector

2.      Semi-Formal Sector

3.      Informal Sector

The sectors have been categorized in accordance with their degree of regulation.

1.      The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs). 

2.      The semi-formal sector includes those institutions which are regulated otherwise but do not fall under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange Commission or any other enacted financial regulator. This sector is mainly represented by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental Organizations (NGOs and discrete government programs. According to statistics of Bangladesh NGO Bureau, 2356 NGOs are working in Bangladesh (31th  December, 2014)

3.      The informal sector includes private intermediaries which are completely unregulated.

1.      Formal Sector

A.    Banks:

After the independence, banking industry in Bangladesh started its journey with 6 nationalized commercialized banks, 2 State owned specialized banks and 3 Foreign Banks. In the 1980's banking industry achieved significant expansion with the entrance of private banks. Now, banks in Bangladesh are primarily of two types:

1.      Scheduled Banks: The banks which get license to operate under Bank Company Act, 1991 (Amended in 2003) are termed as Scheduled Banks.

2.      Non-Scheduled Banks: The banks which are established for special and definite objective and operate under the acts that are enacted for meeting up those objectives, are termed as Non-Scheduled Banks. These banks cannot perform all functions of scheduled banks.

1.      Scheduled banks:

There are 56 scheduled banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and Bank Company Act, 1991. Scheduled Banks are classified into following types:

State Owned Commercial Banks (SOCBs): There are 5 SOCBs which are fully or majorly owned by the Government of Bangladesh.

Specialized Banks (SDBs): 3 specialized banks are now operating which were established for specific objectives like agricultural or industrial development. These banks are also fully or majorly owned by the Government of Bangladesh.

Private Commercial Banks (PCBs): There are 39 private commercial banks which are majorly owned by the private entities. PCBs can be categorized into two groups:

Conventional PCBs: 31 conventional PCBs are now operating in the industry. They perform the banking functions in conventional fashion i.e interest based operations.

Islami Shariah based PCBs: There are 8 Islami Shariah based PCBs in Bangladesh and they execute banking activities according to Islami Shariah based principles i.e. Profit-Loss Sharing (PLS) mode.

Foreign Commercial Banks (FCBs): 9 FCBs are operating in Bangladesh as the branches of the banks which are incorporated in abroad.

2.      Non-Scheduled Banks:  There are now 4 non-scheduled banks in Bangladesh which are:

Ansar VDP Unnayan Bank,

Karmashangosthan Bank,

Probashi Kollyan Bank,

Jubilee Bank

B.     Non-Bank Financial Institutions (FIs):

Non-Bank Financial Institutions (FIs) are those types of financial institutions which are regulated under Financial Institution Act, 1993 and controlled by Bangladesh Bank. Now, 31 FIs are operating in Bangladesh while the maiden one was established in 1981. Out of the total, 2 is fully government owned, 1 is the subsidiary of a SOCB, 13 were initiated by private domestic initiative and 15 were initiated by joint venture initiative. Major sources of funds of FIs are Term Deposit (at least six months tenure), Credit Facility from Banks and other FIs, Call Money as well as Bond and Securitization.

The major difference between banks and FIs are as follows:

1.      FIs cannot issue cheques, pay-orders or demand drafts.

2.      FIs cannot receive demand deposits,

3.      FIs cannot be involved in foreign exchange financing,

4.      FIs can conduct their business operations with diversified financing modes like syndicated financing, bridge financing, lease financing, securitization instruments, private placement of equity etc.

List of Non-Bank Financial Institutions (FIs) in Bangladesh:

    Uttara Finance and Investments Limited
    United Leasing Company Limited (ULCL)
    Union Capital Limited
    The UAE-Bangladesh Investment Co. Ltd
    Saudi-Bangladesh Industrial & Agricultural Investment Company Limited (SABINCO)
    Reliance Finance Limited
    Prime Finance & Investment Ltd
    Premier Leasing & Finance Limited
    Phoenix Finance and Investments Limited
    People's Leasing and Financial Services Ltd
    National Housing Finance and Investments Limited
    National Finance Ltd
    MIDAS Financing Ltd. (MFL)
    LankaBangla Finance Ltd.
    Islamic Finance and Investment Limited
    International Leasing and Financial Services Limited
    Infrastructure Development Company Limited (IDCOL)¿
    Industrial Promotion and Development Company of Bangladesh Limited(IPDC)
    Industrial and Infrastructure Development Finance Company (IIDFC) Limited
    IDLC Finance Limited
    Hajj Finance Company Limited
    GSP Finance Company (Bangladesh) Limited (GSPB)
    First Lease Finance & Investment Ltd.
    FAS Finance & Investment Limited
    Fareast Finance & Investment Limited
    Delta Brac Housing Finance Corporation Ltd. (DBH)
    Bay Leasing & Investment Limited
    Bangladesh Industrial Finance Company Limited (BIFC)
    Bangladesh Finance & Investment Co. Ltd.
    Agrani SME Finance Co. Ltd.

C.    Insurance sector in Bangladesh:

Insurance sector in Bangladesh emerged after independence with 2 nationalized insurance companies- 1 Life & 1 General; and 1 foreign insurance company. In mid 80s, private sector insurance companies started to enter in the industry and it got expanded. Now days, 62 companies are operating under Insurance Act 2010. Out of them- 18 are Life Insurance Companies including 1 foreign company and 1 is state-owned company, 44 General Insurance Companies including 1 state-owned company. 

Insurance companies in Bangladesh provide following services:

Life insurance,

General Insurance,

Reinsurance,

Micro-insurance,

Takaful or Islami insurance

LIST OF NON-LIFE INSURANCE COMPANIES

1. Agrani Insurance Company Ltd.
2. Asia Insurance Ltd.
3. Asia Pacific Gen Insurance Co. Ltd.
4. Bangladesh Co-operatives Ins. Ltd.
5. Bangladesh General Insurance Co. Ltd.
6. Bangladesh National Insurance Co.Ltd.
7. Central Insurance Company Ltd.
8. City Gen. Insurance Company Ltd.
9. Continental Insurance Ltd.
10. Crystal Insurance Company Ltd.
11. Desh Gen. Insurance Company Ltd.
12. Eastern Insurance Company Ltd.
13. Eastland Insurance Company Ltd.
14. Express Insurance Ltd.
15. Federal Insurance Company Ltd.
16. Global Insurance Ltd.
17. Green Delta Insurance Co. Ltd.
18. Islami Commercial Insurance Co. Ltd.
19. Islami Insurance Bangladesh Ltd.
20. Janata Insurance Company Ltd.
21. Karnaphuli Insurance Company Ltd.
22. Meghna Insurance Company Ltd.
23. Mercantile Insurance Company Ltd.
24. Nitol Insurance Company Ltd.
25. Northern Gen.Insurance Company Ltd.
26. Peoples Insurance Company Ltd.
27. Phonix Insurance Company Ltd.
28. Pioneer Insurance Company Ltd.
29. Pragati Insurance Ltd.
30. Pramount Insurance Company Ltd.
31. Prime Insurance Company Ltd.
32. Provati Insurance Company Ltd.
33. Purabi Gen Insurance Company Ltd.
34. Reliance Insurance Ltd
35. Republic Insurance Company Ltd.
36. Rupali Insurance Company Ltd.
37. Sonar Bangla Insurance Company Ltd.
38. South Asia Insurance Company Ltd.
39. Standard Insurance Ltd.
40. Takaful Islami Insurance Ltd.
41. Dhaka Insurance Ltd.
42. Union Insurance Company Ltd.
43. United Insurance Company Ltd.

LIST OF LIFE INSURANCE COMPANIES

1. American Life Insurance Company (Foreign Company)
2. Baira Life Insurance Company Ltd.
3. Delta Life Insurance Company Ltd.
4. Farest Islami Life Insurance Co. Ltd.
5. Golden Life Insurance Ltd.
6. Homeland Life Insurance Company Ltd.
7. Meghna Life Insurance Company Ltd.
8. National Life Insurance Company Ltd.
9. Padma Islami Life Insurance Company Ltd.
10. Popular Life Insurance Company Ltd.
11. Pragati Life Insurance Ltd.
12. Prime Islami Life Insurance Company Ltd.
13. Progressive Life Insurance Company Ltd.
14. Rupali Life Insurance Company Ltd.
15. Sandhani Life Insurance Company Ltd.
16. Sunflower Life Insurance Company Ltd.
17. Sunlife Insurance Company Ltd

LIST OF THE INSURANCE COMPANIES IN PUBLIC SECTOR

1. Sadharan Bima Corporation(Gen. Ins)
2. Jiban Bima Corporation (Life Ins.)

D.    Microfinance Institutions (MFIs):

The member-based Microfinance Institutions (MFIs) constitute a rapidly growing segment of the Rural Financial Market (RFM) in Bangladesh. Microcredit programs (MCP) in Bangladesh are implemented by various formal financial institutions (nationalized commercial banks and specialized banks), specialized government organizations and Non-Government Organizations (NGOs). The growth in the MFI sector, in terms of the number of MFI as well as total membership, was phenomenal during the 1990s and continues till today.

Despite the fact that more than a thousand of institutions are operating microcredit programs, but only 10 large Microcredit Institutions (MFIs) and Grameen Bank represent 87% of total savings of the sector and 81% of total outstanding loan of the sector. Through the financial services of microcredit, the poor people are engaging themselves in various income generating activities and around 30 million poor people are directly benefited from microcredit programs.

Credit services of this sector can be categorized into six broad groups: i) general microcredit for small-scale self employment based activities, ii) microenterprise loans, iii) loans for ultra poor, iv) agricultural loans, v) seasonal loans, and vi) loans for disaster management.

Currently, 599 institutions (as of October 10, 2011) have been licensed by MRA to operate Micro Credit Programs. But, Grameen Bank is out of the jurisdiction of MRA as it is operated under a distinct legislation- Grameen Bank Ordinance, 1983.

2.      Financial market:

Financial market in Bangladesh: The financial market in Bangladesh is mainly of following types:

1.      Money Market: The primary money market is comprised of banks, FIs and primary dealers as intermediaries and savings & lending instruments, treasury bills as instruments. There are currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only active secondary market is overnight call money market which is participated by the scheduled banks and FIs. The money market in Bangladesh is regulated by Bangladesh Bank (BB), the Central Bank of Bangladesh.

2.      Capital market: The primary segment of capital market is operated through private and public offering of equity and bond instruments. The secondary segment of capital market is institutionalized by two (02) stock exchanges-Dhaka Stock Exchange and Chittagong Stock Exchange. The instruments in these exchanges are equity securities (shares), debentures, corporate bonds and treasury bonds. The capital market in Bangladesh is governed by Securities and Commission (SEC).

3.      Foreign Exchange Market: Towards liberalization of foreign exchange transactions, a number of measures were adopted since 1990s. Bangladeshi currency, the taka, was declared convertible on current account transactions (as on 24 March 1994), in terms of Article VIII of IMF Article of Agreement (1994). As Taka is not convertible in capital account, resident owned capital is not freely transferable abroad. Repatriation of profits or disinvestment proceeds on non-resident FDI and portfolio investment inflows are permitted freely. Direct investments of non-residents in the industrial sector and portfolio investments of non-residents through stock exchanges are repatriable abroad, as also are capital gains and profits/dividends thereon. Investment abroad of resident-owned capital is subject to prior Bangladesh Bank approval, which is allowed only sparingly.

Bangladesh adopted Floating Exchange Rate regime since 31 May 2003. Under the regime, BB does not interfere in the determination of exchange rate, but operates the monetary policy prudently for minimizing extreme swings in exchange rate to avoid adverse repercussion on the domestic economy. The exchange rate is being determined in the market on the basis of market demand and supply forces of the respective currencies.

In the forex market, banks are free to buy and sale foreign currency in the spot and also in the forward markets. However, to avoid any unusual volatility in the exchange rate, Bangladesh Bank, the regulator of foreign exchange market remains vigilant over the developments in the foreign exchange market and intervenes by buying and selling foreign currencies whenever it deems necessary to maintain stability in the foreign exchange market.

3.      Financial instruments:

Money Market Instruments: Money market claim mature in less than one year. Because of their short-term maturity, money market instruments undergo the least price fluctuations and so are the risky investments.

The common types of money market securities traded in Bangladesh are given below:

1.      Treasury Bills (T-Bills).

2.      Repurchase Agreements ( Repo or Reverse Repo)

3.      Commercial Papers

4.      Certificate of Deposit

5.      Banker's Acceptance

6.      Call money

Money market participants

Banks, Non-bank, Financial Institutions (takaful companies), business corporations, government and central bank

Capital market instruments:

Debt and equity instruments wit maturity of over one year called capital market instruments. They have far wider price fluctuations than money market instruments and are considered to fairly risky instruments.

1.      Common stocks/Equity

2.      Bonds

3.      Mortgages

4.      Futures

5.      Options

 Difference between money market and capital market:

	Money Market	Capital Market
Definition	Is a component of the financial markets where short-term borrowing takes place	Is a component of financial markets where long-term borrowing takes place
Maturity Period	Lasts anywhere from 1 hour to 90 days.	Lasts for more than one year and can also include life-time of a company.
Credit Instruments	Certificate of deposit, Repurchase agreements, Commercial paper, Eurodollar deposit, Federal funds, Municipal notes, Treasury bills, Money funds, Foreign Exchange Swaps, short-lived mortgage and asset-backed securities.	Stocks, Shares, Debentures, bonds, Securities of the Government.
Nature of Credit Instruments	Homogenous. A lot of variety causes problems for investors.	Heterogeneous. A lot of varieties are required.
Purpose of Loan	Short-term credit required for small investments.	Long-term credit required to establish business, expand business or purchase fixed assets.
Basic Role	Liquidity adjustment	Putting capital to work
Institutions	Central banks, Commercial banks, Acceptance houses, Nonbank financial institutions, Bill brokers, etc.	Stock exchanges, Commercial banks and Nonbank institutions, such as Insurance Companies, Mortgage Banks, Building Societies, etc.
Risk	Risk is small	Risk is greater
Market Regulation	Commercial banks are closely regulated to prevent occurrence of a liquidity crisis.	Institutions are regulated to keep them from defrauding customers.
Relation with Central Bank	Closely related to the central banks of the country.	Indirectly related with central banks and feels fluctuations depending on the policies of central banks.

Islamic Financial system:

1.      A financial system that is based on Islamic principles and values, which eliminates Riba and ensure a profit sharing mechanism in the financial system, may be called IFS.

2.      It may be characterized by the absence' of interest based financial institution & transactions, doubtful transactions or Gharar, Stocks of companies dealing in unlawful activities, unethical or immoral transactions such as market manipulation, insider trading short-selling etc.­

Principles/features of an Islamic financial system:

The basic framework for an Islamic financial system is a set of rules and laws, collectively referred to as Shariah, governing economic, social, political and cultural aspects of Islamic societies. Shariah originates from the rules dictated by the Quran and its practices, and explanations rendered (more commonly known as Sunnah) by the Prophet Muhammad. Further elaboration of the rules is provided by scholars in Islamic jurisprudence within the framework of the Quran and Sunnah. The basic principles of an Islamic financial system can be summarized as follows:

1.      Prohibition of interest: Prohibition of Riba, a term literally meaning "an excess" and interpreted as "any unjustifiable increase of capital whether in loans or sales" is the central tenet of the system. More precisely, any positive, fixed, predetermined rate tied to the maturity and the amount of principal (i.e.) guaranteed regardless of the performance of the investment) is considered Riba and is prohibited. The general consensus among Islamic scholars is that Riba covers not only usury but also the charging of "interest" as widely practiced.

2.  This prohibition is based on arguments of social justice, equality, and property rights. Islam encourages the earning of profits but forbids the charging of interest because profits, determined ex post, symbolize successful entrepreneurship and creation of additional wealth whereas interest, determined ex ante, is a cost that is accrued irrespective off the outcome of business operations and may not create wealth if there are business losses. Social justice demands that borrowers and lenders share rewards s well as losses in an equitable fashion and that the process of wealth accumulation and distribution in the economy be fair and representative of true productivity.

3.     Risk sharing: Because interest is prohibited, suppliers of funds become investors instead of creditors. The provider of financial capital and the entrepreneur share business risks in return for shares of the profits.

4.   Money as "Potential" Capital: Money is treated as "Potential" capital -that is, it becomes actual capital only when it joins hands with other resources to undertake a productive activity. Islam recognizes the time value of money, but only when it acts as capital, not when it is "Potential" capital.

5.    Prohibition of speculative behavior: An Islamic financial system discourages hoarding and prohibits transactions featuring extreme uncertainties, gambling, and risks

6.    Sanctity of contracts: Islam upholds contractual obligations and the disclosure of information as a sacred duty. This feature is intended to reduce the risk of asymmetric information and moral hazard.

7.    Shariah approved activities: Only those business activities that do not violate the rules of Shariah qualify for investment. For example, any investment in businesses dealing with alcohol, gambling, and casinos would be prohibited.

Differences between CFS & IFS:

The conventional financial system consists of Socialistic financial system and Capitalistic financial system. Both systems have been proved inefficient to establish economic balance in the society.

Basis of Difference	CFS	IFS
Religious Belief	Secular & separates Religion from other Parts human life	Belief in unity of God & relates this belief to economic Life of a man
Freedom of Economic Activity	In socialism govt. enjoys economic freedom but in capitalism Individuals enjoys freedom.	Restrictive freedom is allowed in the light of Shariah both by the govt. &/or individuals
Ownership of means	Socialism-state ownership, Capitalism-individual ownership	Allah is the exclusive owner. Man is the caretaker of the property
Goals of financial System	Socialism-profit of the society Capitalism-Individual’s profit	Welfare of both here and hereafter.
Competition	Socialism-No competition Capitalism- Logical & unethical competition	Logical Competition and financial co-operation
Wealth distribution	Socialism-Equal Capitalism – Unequal	Equitable
Basis of Economic System	Riba or Interest	Interest Free; PLS, Zakat & Compensation based
Sources of the System	Intellects brain storming of the economic problems of men’s life	Devine book “Al-Quran” & Prophets(SM) speeches
Result	Capitalism concentration of income & economic power in few hands. Inefficiency	Maximum & equitable Distribution of economic opportunities and higher production in the society
Social & environmental welfare	Do not consider the social & environmental welfare	Ensure social & environmental welfare
Owners exception in respect of respect of investment	Dividend or part of profit in case of equity financing	Part of Profit or Loss
Lender or Bank’s expectation in terms of dept financing	Interest	Profit or Loss Sharing
Modes of Investment	Loan, Overdraft & Cash Credit	Mudarabah, Musharaka, Murabaha etc.

Need for Islamic Money Market

Islamic bank also faced also exposed to liquidity risk. Like conventional, Islamic bank hold illiquid assets while liability relatively liquid. Bank with surplus funds can either lend by placing deposit system with other banks in interbank deposit system or lend by purchasing money market instruments.

Different between Islamic and Conventional Money Market

	Conventional	Islamic
1)      Interbank Market	Issues debt contract for placement of fund	Apply Shariah contracts i.e mudharabah, murabahah and wakalah
2)      Instruments Issuance process	Approved by respective regulators	Approved by Shariah Committee and respective regulators.
Structure	Structured based on debt only	Structure based on assets, equity and debt based.
Investors	Conventional investors only.	Conventional and Islamic investors.

Islamic Money market instruments:

Islamic Inter-bank Fund Market (IIFM) – Bangladesh, the separate call money market for Islamic banks in Bangladesh

Islamic Inter-bank Fund Market (IIFM) -- for sharia-based banks started its journey on June 3, 2012. In such a market, transactions are based on profit instead of interest. Bangladesh Bank Governor Atiur Rahman inaugurated the IIFM at the central bank.

On the first day, Islami Bank Bangladesh Ltd offered funds worth Tk 100 crore, while four banks applied for taking Tk 60 crore from the funds.

The BB governor said the IIFM has been formed in the model of the traditional call money market to remove the temporary and short-term liquidity crisis of the Islamic banks. The Islamic Bond Fund of the central bank will act as the custodian of the IIFM and will not charge any fees for the fund.

According to rules, if any bank has excess fund, it will invest the amount in the IIFM for one day. Another Islamic bank requiring fund will borrow the money from the IIFM for one day. The rate of profit in the Islamic bank call money market will be determined on the basis of the profit the bank gives to its depositors on a three months' deposit.

Foreign exchange market in Islam:

The rule of trade in currencies:

Currency trading may be permissible on one condition that the payment should occur on the same in the contract’s council, if the currency is equal The evidence narrated by Abada Ben Al-Samit may Allah be pleased with him said: The Messenger of Allah peace be upon him: (gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, hand in hand, if these types are different the sell as you like, hand in hand) Narrated by Muslim (1587).

The “Total Fataawa Ibn Baaz” (19/171- 174):

Transactions, buying and selling in currencies are permissible, but only if the exchange be hand in hand if the currencies were different, Example selling the currency of the Libyan currency exchange for the U.S. Dollars or Egypt the transaction  should be done hand in hand within the council, but if the payment was delayed or differed then it’s not permissible, because that case it is considered a form of usury-based (Riba) transaction, it must be the same sitting of the Council hand in hand if the currency is different, but if they are of one type must be two conditions: symmetry and same sitting of the Council, as per the Prophet saying peace be upon him: (gold for gold , and silver with silver… Then he mentioned the Hadith).

And currencies as before if it was different then it is permissible with the differentiation and payment may be in the same sitting of the Council, and if one type such as dollars, dollars, or dinars, dinars must be in the same sitting of the Council, and uniformity.

Islamic financial instruments:

 IDC, IIC and MB 

Three potential instruments proposed in the Seminar on Developing a System of Financial Instruments, jointly sponsored by the Islamic Development Bank and the Government of Malaysia, held in Kuala Lumpur 1986, were 

Islamic Deposit Certificates (IDCs), 

Islamic Investment Certificates (IICs) and 

Muqarada Bonds (MBs). 

These appeared promising the IDC proceeds are meant to be used by the issuing bank for general purposes, while IIC proceeds are meant for investment in a specific project or activity by the issuing bank. The MBs proceeds are meant to be used for income-yielding public utility projects, such as electricity and telecommunications, and infrastructure development projects such as construction of roads and bridges.

The common denominator for all the above three instruments is that they are all based on the principle of profit sharing. The holders of IDC and IIC will also share in the losses, if any, but not the holders of MBs, as the nominal value of MBs would be guaranteed by the Government, which is a third party independent from the other two. It is of interest to note that Muqarada Bonds have already been adopted as a financial instrument in Jordan, though with a limited scope.