INS510

INTRODUCTION TO
ISLAMIC MU'AMALAT
"This day I have perfected your religion for you, complete my blessing on
you and approve Islam as the way of life for you ".
- Al-Quran, 5:33
At the end of the chapter, the students will be
able to:

• Understand the concept of Islam, the objectives

(maqasid) and sources of shariah.
• Understand the prohibitions in muamalat.
• Understand and explain the rules of muamalat
contracts.
 SHARI'A
H Shari'ah is the entire body of Islamic law

OBJECTIVE
To ensure that human life is based on ma'ruf (good) and to
to cleanse of munkar (evils).

MA'RUF
The term ma’ruf denotes all the qualities that have always been guided as ‘good’ by
the Shari’ah and conversey the word munkar denotes all the qualities that have always
been condemned by the Shari’ah as ‘evil’
THE CONCEPT OF DEEN
(SHARI'AH) ISLAM

AQIDAH - SET AKHLAQ - CODE

SHARI'AH - FIQH
OF BELIEFS OF MORALITY

FIQH FIQH
FIQH 'IBADAT FIQH JINAYAT
MU'AMALAT MUNAKAHAT
 FIQH
• Deals with observance of rituals, moral s and social legislation in
Islam.
• Branches of Fiqh :-

FIQH IBADAT FIQH MU'AMALAT FIQH MUNAKAHAT / FIQH JINAYAT

USRAH
• Rules deals with the • Deals with property, • Rules deals with
right owed to Allah contracts, business • Deals with marriage, major offences
SWT organization, waqfs divorce, • i.e zina, theft,
• i.e prayer, guardianship robbery
pilgrimage, fasting • Known as personal
& zakat law
OBJECTIVES SHARI'AH (MAQASID AL- GOALS / PURPOSE

SHARI'AH)
RELIGION LINEAGE
• Preservation / protection of Deen (Religion) under all • Preservation / protection of descendants and honor
circumstances. under all circumstances
• i.e Defending Islamic faith particularly if it attacked by • i.e Islam prohibit its followers in committing adultery
enemies of Islam or other immoral behaviors

LIFE INTELLECT
• i.e enacting a severe punishment for those who kill • Protecction of mind requires safeguarding it from
another anything that might harm the ability and functions of
• The punishment for those who kill innocent human the brain
being is the death penalty • i.e consumption of liquor will damage the functions of
the brain

PROPERTY / WEALTH
• Shari'a requires preservation / protection of property under all
circumstances
• i. e proactive intiatives & planning in safe guarding one's property
against disaster
 SOURCE OF SHARI'AH
AL-QURAN: SUNNAH:
• The very word of Allah SWT • Sunnah means 'method' that includes all that

revealed to the Holy Prophet SWT is form the Holy Prophet SAW comprises

for the benefit of all market what the Propeht SAW said (qawt), action

• The Quran is a comprehensive (fi'll) and agreed (Taqrir)

and indivisible guide and must be • The word Sunnah should be distinguished

accepted and implemented in its from the term Hadith which means sayings or

entirely speeches of Prophet Muhammad SAW

 SECONDARY SOURCE
Juristic consensus of opinion of the imams mujtahid among Muslims in a particular time after the death of Prophet Muhammad s.a.w
IJMA' regarding the legal position of a matter or problem. In its application, Ijma’ is an agreement of Muslims jurist in the event the ruling being
sought is not found in the Quran or Sunnah

Qiyas means to equate the legal position of a matter that has no ruling from the Quran or Sunnah to one that has due to the ‘Illah (underlying
QIYAS cause or reason) of ruling. It is the extension of a Shari’ah value from the original case to a new case, because the new case has the same
effective cause as the original case.

Is the concept in traditional Islamic law, invoked to prohibit or permit something on the basis of whether or not it serves the public’s benefit
MASLAHA
or welfare. The meaning of maslahah is consideration of public interest.
H
Refers to the custom or knowledge of a given society, leading to change in the fiqh. ‘Urf can also specify something generally established in
'URF Quran and Sunnah.

Presumption of existence or non-existence of facts. It can be used in the absence of other proofs (dalil). Istishab relates to the sense that the
ISTISHAB past accompanies the preset without any interruption or change.

Jurisdic ‘preference’. Muslims scholars may use it to express their preference for particular judgements in Islamic law over other possibilities.
ISTIHSAN One of the principles of legal thoughts underlying personal interpretation or Ijtihad.
MANDATORY LAW (HUKUM
TAKLIF)
Wajib (Obligatory)

Mandub (Recommended)

Haram (Prohibited/ Unlawful)

Makruh (Reprehensible / Disapproved)

Mubah (Permissible)
TAKLIFI LAW
Taklifi law is the law that describes the commands, prohibitions & the opinion to run or leave an
activity / job
• Wajib – an act of which the performance of it is obligatory for the subject for example performing solat and
fasting. It is an act whose commission is demanded by the Lawgiver in certain and binding terms.
• Mandub – a demand by the Lawgiver for the commission of an act without making it binding and without
assigning any blame for its omission. The rule for mandub is that for doing so there is a reward (thawab) for the
doer, while omitting it entails no penalty such as giving charity to the others.
• Haram – as one which omission is required by the Lawgiver in binding and certain terms. i.e misappropriation of
another’s wealth.
• Makruh is defined as one which omission is demanded by the Lawgiver in non-binding terms. For instance debt
which is not documented or unrecorded.
• Mubah – known as permissible act is one in which the Lawgiver has granted a choice of commission and
omission, without blame or praise for omission or commission. According to this principle all contracts and
transactions are permissible unless there is evidence indicating otherwise.
BASIC PRINCIPLES OF
MU'AMALAT FREEDOM OF CONTRACT

Muslim are free to act at will to put conditions in their agreements except that which prohibits something which is
permissible or permits something which is prohibited

PERMISSIBILITY AS ORIGINAL STATUS OF MATTERS

The status of all matters other than rituals is permissible until evidence is given that a certain matter is prohibited

CUSTOM IS OF FORCE

An Islamic legal maxim states that "Custom is of force". in many Shari'ah commercial contracts, many things may
become permissible following customs
PROHIBITION IN
MU'AMALAT
• All economic activites are legally permissible as long as these activities do not
transgress any of the tenets of Shari'ah
• Four major Islamic School of Thought (Hanafi, Maliki, Shafi‘e & Hambali)
unanimous that all forms of business transactions that transgress any of the tenets of
Shari'ah are considered invalid
• General principles :-
• No control should made for selling or buying forbidden products such as
alcohol
• No contract for any financial deal on the basis of usury (Riba)
• Contract that involves major uncertainty (Gharar) also forbidden as Gharar that
may make the contract voidable
RIBA
(USURY) In ARABIC it means increase in / addition to

"O you who believe, devour not usury doubling / quadrupling, the sum lent. Fear Allah and observe your duty
to Him, that you may really prospe" - Al-QUran, 3:130

“Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates and salt by
salt, like for like, equal for equal, payment made on the spot. If the species differ, sell as you wish provided that
payment is made on the spot” - Prophet Muhammad SAW

Hadith above, gold and silver represent money while wheat, barley, dates and salt represents
fungible items or food stuffs. These items known as Ribawi items
DIMENSIONS OF
RIBA RIBA AL-QARD
RIBA AL-DUYUN Interest on loan agreed upon at the point of contract
Interest through
financial loan RIBA AL-JAHILLIYAH
Interest because of late payment / failure to repay

RIBA AL-FADLI RIBA AL-BUYU

Happen in unequal exchange of its counterpart Interest through
exchange contract in barter
RIBA AL-NASI'AH
trade
Due to the extension of time delivery
MAYSIR
(GAMBLING)
• Any transaction / activity relating to games of chance / gambling
• A contract that involves element of maysir is batil or void
• Can be concluded as betting / charging somehting that will be forteited if one fails to obtain the
greater gani that hopes for

“they will ask thee about intoxixantss and games of chance. Say: in both there is great evil as well as some
benefit for man: but the evil which they cause is greater than the benefit which they bring” - Al-Quran, 2:219
GHARAR
(UNCERTAINTY)
• Gharar means hazard, chance, stake or risk
• Makes a transaction / activity un-Islamic as it will result into an unjust or unfair outcome
• The quantity / quality in the transaction is not predetermined and known
• Occurs when element of uncertainty in a transaction wjose existence characteristic are not definite, due to
risky nature which may void the contract
• Divided into:-

MINOR (YASIR) GHARAR MAJOR (EXCESSIVE) GHARAR

- Minor Gharar is forgiven - Causes a contract to be invalid

- Does not affecct the principal components of - An ucertainty which great that it becomes
the contract and necessary conditions of the unacceptable
essential elements - It is so vague that there is no means of
- i.e asset, price, language of the contract quantiffying it
 CONCEPT OF CONTRACT IN
ELEMENTS OF 'AQD MU'AMALAT
DESCRIPTIONS

• It is a condition of a valid contract that the parties possess capacity.

Aqidain • Capacity is a quality which makes a person qualified for acquiring rights and
undertaking duties and responsilities

• Sighah is the form of the contract of ijab and qabul (offer and acceptance).
Sighah • The offer made by the first party to the contract is called ijab because it gives & confirms the freedom of acceptance to the second party

• The subject matter and price.

• They are conditions to be taken into consideration according to Islamic
Ma'qyd alayh
jurisprudence for subject of contract has to be legal in, existent and identified.
 APPLICATION OF SHARI'AH
CONTRACT IN TAKAFUL BUSINESS
UNDERLYING CONTRACT EXAMPLE
KAFALAH • The participant contributes to the Takaful fund by a mutual agreement that the
- Contract of guarantee whereby a Takaful Operator (TO) is entrusted to undertake in managing the Takaful fund
person adds to himself a prudently and to pay the Takaful benefits to the participants in the event of a
responsibility / liability on misfortune.
behalfof another person • The Kafalah contract is prevailing in the Takaful operational system in Malaysia.

TABARRU' • The participants mutually agree to contribute to the Takaful fund based on the
- Gift / donation given by one in contract of Tabarru’
favor of someone without seeking • Tabarru’contract is core element in Takaful business and is not only practiced in
any consideration Malaysia but also worldwide
 APPLICATION OF SHARI'AH
CONTRACT IN TAKAFUL BUSINESS
EXAMPLE
UNDERLYING CONTRACT

WAKALAH • The participants appoint the TO as their wakil and to manage their Takaful
- Contract of agency which a person deligates coverage and the Takaful fund.
his business to another / substitutes other in • The Wakalah contract is practiced by all TO in Malaysia while most of the
his place (Wakil) TO worldwide operate under the Wakalah model
- Both are eually bound under contract

JU'ALAH • The participants contribute a sum of money to the Takaful fund. The TO is
- Contract of hiring services, which 1 paty entrusted to manage the Takaful fund prudently in terms of investment and
undertakes to pay specified amount for pay out Takaful benegits to the eligible participants in the event of a
services rendered in accordance with terms misfortune.
negotiated between them • The Ju’alah contract practices by all TO in Malaysia while most of the TO
worldwide operate under the Wakalah model
 APPLICATION OF SHARI'AH
CONTRACT IN TAKAFUL BUSINESS
UNDERLYING CONTRACT EXAMPLE
MUDHARABAH (PROFIT SHARE) • The participant contributes a sum of money to the Takaful fund in which the
- Financial contract where 1 party Rabb participants act as Rabb al-Mal, while the TO act as Mudarib who agrees to
al-Mal provides fund to other party manage the fund in view of making profit in which both, the participants and
Mudharib who undertakes to manage it also the Operator share the profit proportionately.
through investment / trade and generate • Syarikat Takaful Malaysia practiced Mudharabah contract and for some TO
profits in Malaysia is practicing Mudharabah on certain products
- Profit share in a preagreed proportion

MUSHARAKAH (PARTNERSHIP) • The respective shareholders mutually agree to contribute a sum of money to
-Contact of Shirkah (Partnership) initiate the Takaful business. This mutual agreement among the shareholders
- Agreement between 2 or more parties in is called musharakah.
particular business which all parties • Musharakah contract is practiced among all the shareholders of all TO in
contribute the capital in view of profit Malaysia.