Category Archives: Business/Finance

Business

Pension Plans and Education Funds

QUESTION:

Dear Mufti,

Can you say if pension plans that are interest free and accident and emergency medical plans together with education plans for children to go uwi is permissible from Guardian life?

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ANSWER:

As Salaam Alaikum,

Pension plans that are interest free is permissible.

The accident and emergency medical plan is really an ‘Accident Insurance’ offered by Guardian life. This operates like other form of insurances where Gharar (uncertainty) is found. Hence, it will not be permissible.

Education plans for children is another product of Guardian life which encourages one to put aside/save or contribute towards a child’s future education. This on its own is good when it is connected to simply saving monies for the future education of one’s child. However, in many cases an ‘Education plan’ is combined with an insurance. The purpose of being combined with an insurance is that if something happens to the parent or if he/she becomes disable or passes away, then the child will still receive the predetermined payout amount when the plan matures. The Insurance ensures that the child’s education will continue if the savings portion is not sufficient to pay out the child’s education. Therefore if the ‘Education plan’ is combined with savings and insurance, then it will not be permissible due to the unlawful elements present in Insurance. If a person has taken out such a plan, then it will be permissible for him to benefit from the savings portion which was contributed to the fund.

If the ‘Education plan’ deals only with the savings of a person which he contributes on a monthly basis and builds up a fixed fund over several years, then this is permissible.

And Allah Knows best

Mufti Waseem Khan

30/11/2017

Is Forex Trading Permissible?

QUESTION:

Assalamu Alaikum,

Mufti,

My question today is based on if Forex Trading is Permissible in Islam?

I have been doing some research for myself but i need advice from you. From certain articles online it is said that the prophet pbuh said it was permissible to trade currencies once it is done immediately and at the current market price.

Now this brings us to trading on the forex market presently. when you trade you either buy or sell a currency pair at a price now that price will fluctuate influencing you to either buy or sell now that moment of buying or selling will come from your own idea or from charts being provided online you then place your money on the trade but lets say you enter at a certain price for buying but the market turns around you will be losing. it is something that is never guaranteed.
(like playing lotto etc you buy a ticket and you either win or lose)
when you enter a trade you either win or lose.

Sorry for the long email but it something i need some clarification on.
I am a revert so I need scholars advice to help me in making these decisions.

JazakAllah Kair

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ANSWER:

Wa Alaikum As Salaam,

Trading in currencies (foreign exchange) is permissible in Islam with the following:-

  1. The Transaction between the two parties must be done immediately without delay on any side.
  2. The two currencies that are traded in, must be exchanged on the spot without delay.
  3. Currencies traded in, must be actually owned and possessed by a person. When the currency exchange takes place, the actual delivery of currency (sold) by the seller must take place, and the actual taking possession of the currency by the purchaser must take place. Both parties must take possession of the currencies traded in, in the same sitting and there must be no delay on any one side.
  4. No element of interest must be present in the transaction.

 

The above conditions must be present for the validity of trading in currencies.

 

With respect to Forex trading via the internet, it is seen that some of the conditions laid in Islam for currency trading is not present. For example, when real/actual possession, ownership and delivery must take place, it is seen that in Forex Trading (via the internet), forex traders do not expect to take actual delivery of the currency they are buying, and they do not actually own the currency they are selling. They are simply speculating that the value of one will go up and the value of another will go down.

 

Similarly, while interest is totally prohibited in Islam, one finds that in Forex trading markets, interest is charged for not using the deal at the same day. In some cases, the agent sells something which he does not possess, and is forbidden in Islam.

 

Hence, in my opinion, Forex trading markets (via the internet) will not be permissible.

 

And Allah knows best

Mufti Waseem Khan

1/12/17

Is this type of trading permissible?

Assalamu Alaikum,

My mom does sales for a living, purchasing of wholesale goods to resell retail.

Once a month she receive goods on credit. She will receive the goods without paying upfront and then she will resell at her retail prices then payback the wholesale company for the goods taken on credit.

Her question, is there an issue with receiving goods and reselling those goods before it is paid for?

Wa Alaikum As Salaam,

There is no prohibition in receiving the goods and then reselling them before paying for them. This is permissible. Her dealings are based on an agreement with the wholesalers, where they have granted her the allowance to sell the goods and then pay for them. This is permissible in Islam.

And Allah knows best,

Mufti Waseem Khan

22/05/2017

Can a person have a DEFERRED ANNUITY?

Assalam-O-Alaikum,

I would like to know if a deferred annuity is halal to have. Looking forward to your speedy reply.

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

A Deferred Annuity is not halal to have. This ‘Annuity’ is bought from an insurance company where you are required to pay premiums over a period of time. Over an accumulation period of the deferred annuity, your money earns interest at rates set by the insurance company. Hence, it is not permissible.

And Allah Knows Best.

Mufti Waseem Khan.

29/11/16.

Are Tax Saving Incentive Plans permissible?

Assalaamu Alaikum Mufti Sahib,

I’m in need of financial advice…in regards to those Tax Saving Incentive Plans (TSIP) whereby one can reclaim on one’s annual income tax, are there any halal ones available? If so, can you direct me to one?

Also, even if there’s no halal ones available, is it permissible to partake in a plan, not use the interest gained (…and perhaps just donate the equivalent to a needy organisation even though there’s no blessing associated with it) and make the claim for the yearly income tax?

I believe the government said for either $60K or $72K contribution per year in the TSIP, you can claim it back when you file your income tax.

The Bank or Insurance company you take it with will invest it and it’ll “grow”. I’m not sure whether this will be considered halal or not, that’s why if it’s not, if it’s okay to take out the plan but give away the profit or whatever gains that you get back on the total contribution and just be able to claim back on the income tax.

I think you can also claim back on an annuity plan…not sure if it’s one and the same, but the premise of the reclaiming was to encourage savings I believe.

Please advise what should be done in this matter جزاك الله

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

There isn’t any TSIP which is halaal here in Trinidad. With Respect to partaking in a plan even though you do not want to use the interest gained, will be questionable. The reason for this is that when you take part in a plan, your money is pooled together with monies of other contributors and invested or placed in a manner to receive interest. If the monies are invested in companies that deal with haram products, then your monies would have been invested in something which is haram. And if interest is generated, then it means that interest has been generated upon your money also.

Banks, most of the time, invest in higher-yielding fixed income investments like mortgage, securities, treasury bonds and notes etc. All of these bring about interest. Insurance companies also invest in various investments which include bonds and money market funds. These also bring about interest.

It is not permissible to invest your money in a plan or company which you know will invest your money in unlawful products or use your money to earn interest.

Claiming back an annuity plan means that you will have to take out an annuity plan. This plan is only issued by an insurance company which means that your monies paid to the insurance company would be used by the company to bring about returns and interest. Hence, it will not be permissible.

And Allah Knows Best.

Mufti Waseem Khan.

15/11/16.

What are the rulings on loans in these situations?

Assalaamu Alaikum,

I would like to know if the following are permissible in Islam please:

  1. Is it permissible to use money borrowed from a non-Muslim person who took a loan to lend it to the Muslim person?
  2. Is it permissible for a Muslim person to act as a guarantor for a loan that a non-Muslim is taking?

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

  1. It is permissible for one to use money borrowed from a non-Muslim who took a loan to lend it to the Muslim.
  1. If the non-Muslim is taking a loan which requires him to pay interest, then the Muslim cannot become a guarantor for such a loan. However, if the loan is free from interest, then the Muslim person can act as a guarantor for it.

And Allah Knows Best.

Mufti Waseem Khan.

31/10/16.

Can a person invest in bonds, mortgages etc.?

Assalamu Alaikum.

I would like to know what some halal investments are in T&T. Is unit trust permissible? Also gov’t bonds, corporate bonds, mortgage funds and property and equity funds. I was approached in particular by someone from maritime life about these interns of an annuity plan.

If these are not permitted can u recommend some that are? JazakAllah.

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

These are not permissible to invest in. With respect to the Unit Trust, monies of the client are invested into both Halal (Lawful) and Haram (unlawful) schemes/companies. The client does not know exactly where his/her money has been invested.

Gov’t bonds, Corporate bonds, and mortgage funds all pay interest and this is haram in Islam. A property fund is one in which an investment is made in a property, and there seem s to be no problem in investing here except that the investor must agree to suffer a loss in his investment if there is a depreciation in the value of the property. The return must also not be a fixed return. It must be based on the value of the property, when it is sold in proportion to the amount invested by a person. The property in which your monies are invested must be an ethical one which is not involved in haram activities. In short, a property fund must be Shariah compliment before you invest in it.

With respect to equity funds, only that which is Shariah Compliant, will be permissible to invest in.

With respect to those investments which are permitted in Islam, over here, there isn’t any official Islamic Financial Body that does investments and can ensure that companies are Shariah Compliant for a Muslim to invest in. it is up to the individual to look at the options he/she has in doing his/her private investments through real estate or through any other halal avenue.

And Allah Knows Best.

Mufti Waseem Khan.

18/10/16.

Is this gambling?

Question:

Asalaamu alaikum. I asked an alima about whether or not it was gambling if co-workers got together and put money in a pot in a competition to lose weight. At the end of the competition, the person who lost the largest percentage of weight would get the money.  The alima told me that that was indeed gambling. So when I told the other members of the group, they asked me for hadith proof.  One member proposed that the winner would just get a gift card and certificate. Would that make it halal?  Someone also posed the question as to what the difference between this competition and a basketball tournament where the participants have a joining fee and the winner wins a cash prize or trophy.

Answer:

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

According to the Scholars, whenever there is the possibility of winning or losing and uncertainty of acquiring something paid for, it is considered a gamble. Therefore, every such game, competition etc. which carries this implication will be regarded as a gamble.

In the Competition you have mentioned, money is paid by each person to afford him/her the chance to win. A person who has paid the money can lose his money or win all. This is gambling as mentioned by the Scholars.

As such, instead of doing what you propose, the competition should be held in a manner where there is an understanding among all the members that they will enter a competition of losing weight, and whoever loses the most weight, then the other members (co-workers) will join to purchase a gift/prize for that person. This will be allowed since in this manner, the winner would not be one who has put money to the competition.

And Allah Knows Best.

Mufti Waseem Khan.

6/10/16.

Is it permissible to lease items/equipment?

As-salāmu ʿalaykum,

I wanted to know whether it is permissible to lease items. For example, if I paid $20,000.00 for a piece of equipment and a person wants to purchase the said equipment.

I would lease the item for a year at $2500.00 per month for one year, which would make the cost of the said item to be $30,000.

A contract would be done then done with the above details and both parties would sign the agreement.

I acknowledge that riba is totally haram and wanted to know if the following transaction would be ḥalāl with regards to deen. Jazāk Allāh.

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

Yes, it is permissible to lease items. If you have purchased an equipment and then wish to lease it to a person for a specific period of time with a fixed monthly payment, this is permissible.

In the example which you have given, leasing the equipment for a year with a monthly payment of $2,500.00 will be permissible even though the total sum collected at the end of the year will be more than that which you paid for the item.

However, if the person wanted to purchase the item, then a contract of sale will be done not that of lease. Both types of contract cannot be done at one and the same time. Before you and the other person can enter into an agreement, the nature of the contract must be made clear to each party. If it is a sale, then the laws of sale will be applicable and both must agree on the sale. If it is a lease agreement then the laws of leasing will be applicable and both parties must agree on the lease agreement. It will not be permissible for the other party to have an understanding that he is purchasing the item, while you have an understanding that it is a lease which you are doing. Both parties have to agree upon only one transaction at a given time.

Therefore, in the example your have given, if a person wants to purchase the equipment from you which had cost you $20,000.00, then it is permissible for you to add a profit to it and sell it to him. In adding a profit, you cannot put an exorbitant mark-up on the item which is above the market price/value. So, if the selling price is agreed at $30,000.00 (which both parties see as being reasonable), then you can sell it to him for this price and allow him to pay a monthly installment for a given amount of months until he pays out for it.

If on the other hand, you want to lease the item in a manner that you can also make a profit, then this is also permissible. In the example given, you and the person can enter into a lease agreement for the one year period at $2,500.00 per month. At the end of the year, you will collect $30,000.00 which will include the monies you paid for the equipment plus a profit. However, because this is a lease agreement, the person will not automatically become the owner of the item. Until this time (at the end of the lease period) you will still be the owner. Seeing that you have collected the amount you wanted, you can either hand over the item to him and make him the owner without charge, or you may sell the item at a very low price to him, which will now make him the owner of the item.

And Allah Knows Best.

Mufti Waseem Khan.

4/9/16.

Question on Interest

Assalaamu alaikum,

I received an award of RBC Royal Bank’s Roytrin Units a couple years ago. I don’t know where the interest comes from so I consider it haram wealth until proven otherwise. I would like to close the account and give the money to charity.

Will there be any reward for this?

Can I give it to any cause, or is there a preferred way of disposing questionable wealth? Jazak Allahu khair for you time and your effort.
Wa Alaikum Assalaam,

الجواب و بالله التوفيق

The fact that it is interest means that it is unlawful wealth regardless of where it may come from. As such, you should give out the money to anyone in need without the intention of charity or receiving rewards. Since it is not lawfully earned income, there will be no reward in doing this.

You should not give it for any ‘good cause’ like that of an ‘Islamic cause’. The preferred way of disposing it is to give it to someone who is in need, whether Muslim or non-Muslim.

And Allah Knows Best.

Mufti Waseem Khan.

29/06/16.