CRESCENT ENGLISH HIGH SCHOOL, DUBAI
A PROJECT REPORT ON
FINANCIAL CONTRACT IN ISLAM
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SUBMITTED TO
TEACHER OF ISLAMIC STUDIES
MRS. SADIA AFZAL
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BY
MOHAMMED ZIYAN KALIYADAN
GR NO: 12122
TABLE OF CONTENT
Sl
Content Slide No.
no.
1 Learning Objective 4
2 General Prohibition in Finance 5
3 Mudarabah 6
4 Musharakah 7
5 Wakala 8
6 Ijarah 9
7 Salam 10
8 Islamic Finance and SDG 11
AYAT OF THE
ِم َن ا ْل َم ِّس ۚ َٰذ ِل َك ِب َأ َّن ُھ ْم
DAY
ا َّل ِذی َن َی ْأ ُك ُلو َن ال ِّر َبا ل َا َی ُقو ُمو َن ِإل َّا َك َما َی ُقو ُم ا َّل ِذي َی َت َخ َّب ُط ُھ ال َّش ْی َطا ُن
َقا ُلوا ِإ َّن َما ا ْل َب ْی ُع ِم ْث ُل ال ِّر َبا ۗ َو َأ َح َّل الل َّه ُ ا ْل َب ْی َع َو َح َّر َم ال ِّر َبا ۚ َف َمن َج ا َء ُه َم ْو ِع َظ ٌة ِّمن َّر ِّب ِھ
َفان َت َھ ٰى َف َل ُھ َما َس َل َف َو َأ ْم ُر ُه ِإ َلى الل َّه ِ ۖ َو َم ْن َعا َد َف ُأو َٰل ِئ َك َأ ْص َحا ُب ال َّنا ِر ۖ ُھ ْم ِفی َھا َخ ا ِل ُدون
“Those who eat Riba(usury) will not stand (on the day of resurrection)
except like the standing of a person beaten by Shaitan (Satan) leading
him to insanity. That is because they say: “Trading is only like
Riba(usury),” whereas Allah has permitted trading and forbidden
Riba(usury). So whosoever receives an admonition from his Lord and
stops eating Riba(usury) shall not be punished for the past: his case is
for Allah (to judge); but whoever returns [to Riba(usury)], such are the
dwellers of the Fire-they will abide therein.”
LEARNING
OBJECTIVE
To explain the key principles and types
of financial contracts in Islamic finance.
General
Prohibitions
1. Prohibition of Riba (usury)
One of the most prominent principles of Islamic finance is the prohibition of
riba (usury or interest). The Quran explicitly forbids charging or paying
interest.
2. Avoiding Haram Investments
Islamic finance also prohibits investments in businesses or activities
considered haram (forbidden), such as those involved in alcohol, gambling,
pork, and other prohibited goods and services. Such act is not permissible in
the Islamic ethics.
3. Speculation (maisir)
Sharia strictly prohibits any form of speculation or gambling, which is called
maisir. Thus, Islamic financial institutions cannot be involved in contracts
where the ownership of goods depends on an uncertain event in the future.
4. Uncertainty and risk (gharar)
The rules of Islamic finance ban participation in contracts with excessive risk
and/or uncertainty. Gharar is observed with derivative contracts and short-
selling, which are forbidden in Islamic finance.
MUDARABAH
Mudarabah (profit-loss sharing business) is a type of business
agreement between two parties where one party provides
capital (Rabb-ul-Maal) and the other labor or management
(Mudarib) for the business. It helps finance businesses based
on profit sharing without involving any riba or interest. Hence,
it forms a Sharia-compliant mode of financing.
MUSHARAKAH
Musharakah (Partnership Contract) is a joint enterprise or
partnership structure in Islamic finance in which partners share
in the profits and losses of an enterprise. Since Islamic law
(Sharia) does not permit profiting from interest in lending,
musharakah allows for the financier of a project or company to
achieve a return in the form of a portion of the actual profits
according to a predetermined ratio.
Example/RLA
Suppose that individual A wants to start a business but has
limited funds. Individual B has excess funds and wishes to be
the financier in musharakah with A. The two people would
come to an agreement to the terms and begin a business in
which both share a portion of the profits and losses. This
WAKALA
We use a wakala term widely in Islamic Finance. Wakala is the
agency contract in which the principal offers the capital to the
agent to perform a task or labor on behalf of the principal. The
main purpose of this contract is to facilitate transactions and
business when the principal does not have time, knowledge, or
experience to carry out the task on his own. Depending on the
agreement by both parties, any of them can terminate a
wakala contract at any time. The agent offers his service to the
principal for a fixed fee.
IJARAH
Ijarah is an Arabic term that means “lease”, “rent” or “hire”.In
the context of Islamic banking and finance, Ijarah refers to a
contract where one party (lessor) leases a tangible asset or
property to another party (lessee) for an agreed period of time
and at an agreed rental price. This means that the lessor
retains ownership of the asset while the lessee has the right to
use it in exchange for payment.
Salam
The Salam contract is defined as a sale where a buyer pays
upfront, with the understanding that goods will be delivered at
a specific future date. Bai Salam transaction in Islamic finance,
predominantly employed for financing farmers and small
traders, functions as a vital financial tool for micro banks and
financial
عليه وسلمinstitutions in supporting
رسول الله صلى الله small
قدم:عنهما قال اللهindustries
عن عبد الله بن عباس رضي
«من أسَلَف في: فقال، السنة والسنتين والثالث: وهم ُيسلفون في الثمار،المدينة
إلى أجل معلوم، ووزن معلوم،»شيء فلُيسلف في كيل معلوم.
‘Abdullāh ibn ‘Abbās (may Allah be pleased with him) reported that
when the Messenger of Allah (may Allah's peace and blessings be
upon him) came to Madinah, they used to pay one, two or three
years in advance for fruits, so he said: "Whoever pays in advance
for anything, let him pay for a specified measure and a specified
weight, to be delivered on a specified period of time.“ [Sahih
ISLAM AND SDG
GOALS
Islamic finance has ensured that more financial resources are
mobilized in a sustainable way for the SDGs, in a way that is
more inclusive. Harnessing zakat and waqf flows could be a
first step in mobilizing these flows towards the SDGs and
towards underfunded humanitarian and development needs.
Islamic finance promotes equitable distribution of wealth and
resources, which can help alleviate poverty by providing
access to financial services for underserved populations.
Instruments such as Zakat (obligatory almsgiving) and
Sadaqah (voluntary charity) play a significant role in poverty
alleviation and social welfare.
! شكرا
