Islamic banking and finance hinge on three major shariah (Quran and Sunnah) principles; the prohibition of Riba, the prohibition of Gharar, and the prohibition of Maysir.
These three are the major fundamental principles that drive the conduct of Islamic banking and finance, and without them, a bank cannot be Islamic.
When these principles are applied, immediate positive results are ascertained. This is the main reason why the phenomenon is appealing to both Muslim and non-Muslim nations. In fact, I call these principles the ‘fitra’ (the natural disposition of man). Now we will deal with them one after the other.
Riba
It is derived from the Arabic word “rab-wa” meaning to grow up or to exceed. Islamically, it means usury or interest, even though it encompasses more of these meanings under Shariah.
Riba transactions have been classified in two categories; (i) raba al-Fadl, where excess amount above a loan in exchange for commodity of the same kind is paid back by a debtor to the creditor. For example, paying back a loan of salt in excess of what the debtor received from the creditor. And (ii) riba-al-Nasiah which is the most popular form of riba today, where a fee is charged on borrowing money due to the time period the lender has to wait for repayment. Thus, here, money is used as a commodity.
Shariah prohibitions of riba are found in four different chapters of the Quran; (Al-Room 3:39, Al-Nisah 4:161, Ali-Imraan 3:130, and Al-Bakarah 2:275-9). In addition, the sunnah of the prophet (s.a.w) has detailed varieties of usurious transactions as well and elaborated on them.
A case in point is the famous hadeeth of the messenger of God (s.a.w) “The prophet has cursed the one who accepted riba, the one who paid it, the one who recorded it, and the two witnesses to it. And he said they were all alike”. It is also reported that the prophet (s.a.w) has said “Exchange gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, measure for measure and hand to hand. If the exchange articles belong to different genera, the exchange is without restraints provided it takes place in a hand-to-hand transaction”.
From the above, riba in the modern sense is categorically prohibited in the holy Quran and practices of the prophet (s.a.w) and his companions. Examples of riba instruments in conventional banking are; car loans, home loans, term loans or overdrafts, and personal loans. Savings and fixed deposit accounts also attract riba.
Gharar is an Arabic word. Islamically it is a broad concept. It means deceit, risk, fraud, uncertainty or hazard, that may cause destruction or loss.
According to Shariah, it refers to any transaction that is clouded by uncertain outcomes due to a lack of transparency or lack of adequate information needed for a satisfactory transaction of a contract that may cause future disagreements between parties. The nature and quality of a subject matter in a transaction may also be hidden by an element of Gharar.
There is no specific evidence from the Quran about the prohibition of Gharar. However, Allah mentions in the Quran; “eat not your properties among yourselves unjustly by falsehood and deception, except it is a trade amongst you by mutual consent”, Al-Bakarah 2:188.
Maysir
The third and last category is Maysir which means gambling. It refers to the easy acquisition of wealth through the game of chance whether or not it deprives the other’s right. In other words, Maysir is a zero-sum game.
The Quran categorically prohibits gambling, Al-Bakarah 2: 219 and Al-Maidah 5: 93. For example, when there is uncertainty about the timing of benefits of pure life insurance, then there is an element of Maysir in it. Further, the transfer of wealth from losers to winners in casinos without creating a new stock of wealth is also gambling. Moreover, contracts involving pure speculation, conventional insurance and derivatives instruments are examples of mMaysir.
Riba, Gharar and Maysir are the three most important principles according to the revealed text and practices of the prophet (s.a.w), and every financial transaction must be free from these three elements lest they become void.
Islamic banking has emerged as a viable alternative to conventional banking in many Muslim and non-Muslim countries.
Therefore, it is just fair on our part to demystify the meanings of some concepts of this viable alternative banking to our own in Ghana before it hit the ground running in our country. May Allah make us witness Islamic banking and finance practices in Ghana very soon. Ameen! And Allah knows best!
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana.
Email: yahaya0246873726@gmail.com
Facebook account: facebook.om/Yahaya.iliasu.94
0506218343 / 0246873726
