IE Exam Revision Notes.docx - Islamic Economics Exam info...

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Islamic Economics Exam info Date: 14/5/2018 Time: 8.30am – 10.30am Duration: 2 hours Venue: Multi-Purpose Hall Topics to be covered; Answer FOUR out of SIX questions, each equal marks. 1) Lecture 7 – Shariah Framework 2) Lecture 8 – Prohibitions 3) Lecture 9 – Zakat 4) Lecture 10 – Waqf 5) Lecture 12 – Takaful 6) Lecture 13 – Welfare & Development Page | 1
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Lecture 8 - Prohibition of Riba in Islamic Law = Riba literally means excess, expansion, increase, addition or growth. Technically, riba could be defined as unlawful gain derived from the quantitative inequality of the counter-values in any transaction purporting to affect the exchange of two or more species which belong to the same genus and are governed by the same efficient cause. Types of Riba 1) Riba in loan contract (riba al-duyun)/riba al-nasi’ah (excess due to delay in payment), also known as riba al-Qur’an. Occurs in lending and borrowing transactions. Literally, the word nasiah comes from the root word nasa’ which means to postpone, delay, defer or wait. Technically, it refers to any unjustified increment in borrowing or lending money whether in kind or cash, over and above the principal amount as a condition stipulated or agreed between the parties. 2) Riba in exchange contracts (riba al-buyu’)/riba al-fadl, also known as riba al-Sunnah. Occurs from trading or exchange transactions in which a commodity is exchanged for the same commodity from the ribawi commodities in an unequal amount and/or delay of the delivery of one of the commodities. = The main hadith with reference to the comprehensive meaning of riba is one which was reported by ‘Ubadah bin Samit that the Prophet said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, like for like, equal for equal and hand to hand if the commodities differ, then you may sell as you wish provided that the exchange is hand to hand” (Sahih al-Muslim). Riba and Late Payment Compensation (Ta’widh) = An Islamic financial institution may not impose late payment charges as this will infringe the rule of riba. The charge, if imposed, will constitute an unjustified increment above the principal amount due to deferment of the payment. The essence of the permissibility of ta’widh is to Page | 2
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deter the tendency by customers who might deliberately decide or intend not to pay their obligations as and when due. However, debtors assessed and confirmed to be in actual difficulties should not be punished. Rather, they should be granted ample time to settle their debts. Prohibition of Gharar = Gharar is another important element which could render a transaction void. Literally, the word gharar implies risk, uncertainty and hazard. Technically, Ibn al-Qayyim described gharar as a sale in which the vendor is not in a position to hand over the subject matter to the buyer whether the subject matter is in existence or not.
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