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MoneyMatters – All About Riba QA 4

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Mansoor Danish

Channel: Mansoor Danish

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Episode Transcript

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Salam Alaikum, warahmatullahi wabarakatuh there's a question who wants to know, what about the 0% markup to buy a mobile phone, there are companies where which are nowadays offering 0%. Finance, there are two questions, and I'm going to combine them. There are 0% finance, but they have a penalty on delayed payments. What is the ruling on that you see, most of these 0% finance scheme are actually Riba based transactions. What happens is, if you actually go through the loan agreement, the finance company eventually pays to the mobile company, whatever the price of the product is less a small amount, if you would have bought it from the mobile company, let me give you an example. So

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this becomes clear to you. If you would have bought the mobile directory from the mobile company, they would have charged you, let's say 50,000 rupees for the mobile.

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However, you don't have 50,000 rupees you go to the finance companies, these finance companies receive special discount from the companies. So the companies tell them that Listen, this guy wants a mobile, he doesn't have money, are you ready to finance them, the finance company comes to your aid, and says we'll pay on your behalf. So what they do basically is they ask you to pay the finance company back 50,000. As EMI and in case you make a delay in payment, there is an interest, we're going to come to that later.

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Between the finance company and the company's selling the mobile what happens is, if you see the actual loan

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statement, which will come in the very first month, you will notice that a small amount is being shown as interest.

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Effectively, you're paying 50,000 only what was the price of the mobile when you came to the mobile company directly to buy. So effectively, you're paying back 50,000 to the finance company also. But what has happened is the finance company is probably charging 1000 rupees interest. And they're effectively paying 48,000 rupees to the mobile company, and the balance 2000 they are showing it as interest. So what's happened is and the back end, you can make out from this transaction from this accounting transaction, that effectively the mobile company received 48,000, they have a tie up with finance companies. Because imagine how many customers are getting financed by these finance

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companies, you are just one buyer, you go if you don't have the money you come out, but the finance companies actually hold on to these customers. So that's why they have a good tie up with these mobile companies and mobile companies give them some discount. These discounts are now taken out from you in the form of an interest and interest. Is this allowed? This is not allowed. Because what the finance company did was it didn't own the mobile. It was doing 50,000 financing for you. If it was graduate, yes, no problem. But when you see the loan agreement, you figure out that actually, these guys have only paid to the mobile company 48,500 rupees, the balance 1500 they're showing it

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as interest effectively on my bill 50,000 Mobile, I received it at 50,000. No problem. But there is an interest embedded in it. So they call it 0% finance because effectively it works out as 0% for you. I hope this is clear to you. They can't be anything called 0%. Finance, okay. When people say 0% it means that there is something involved in it. All right, otherwise, it should be interest free. Why don't they call it interest refinance? Why do this is 0% Finance? Okay, what they're trying to tell you is the financing you and effectively it works out a 0% for you.

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I hope this is clear to you. And hence this becomes ribeye and you should avoid all of these schemes. As far as a case or a scenario where you know that everything is perfect. It's interest free finance, but there is a penalty on delayed payments. This will now come back to the difference in opinion amongst the scholars, where most of the Saudi scholars and the humbly scholars are of the view that any contract where you're assigning to pay any delete payment is haram. Whereas people from the Hanafi jurisprudence are of the opinion that if you are going to be sure that you will make the payment and the due date and you have enough money to pay off your dues, then it doesn't

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tantamount to a haram contract the difference in opinion, but what I have explained to you early on is far more serious to be considered and that is why you must try and avoid these 0% scheme and Allah knows best. There was a questioner who wanted to know if the property that I own can be given to rebab his bank for rent, you're letting it out on tenancy etc. Now this is interesting. The rule according to most of the humbly scholars

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As far as giving any place out to a financial institution or any rubbish institution is concerned is that it is not allowable. And the ruling is following the simple concept that if you promote that which is haram, then you are party to that which is haram. So, for example, if you own a plant land or if you own a building and a bank approaches, and you let that place out, you become a party to the sin. Remember, we are reminded repeatedly that not only should we stay away from the Shaitaan, but we should also away stay away from the foot want to shake down the footsteps. So these are the footsteps which we need to stay away from rubber. This is a door which opens up to Muharram Okay,

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from one justification we move to another justification. And that is why, according to the views of shape been bars, or shakes Alia, Mona Jade and other scholars, this is considered that this is participation in sin and Mr. Mulleavy and I'll send the they will all have the view that those who participate in a sin they should also the curses upon them as well. Okay. And remember, Allah says in the Quran in surah tomada that we must help one another in albear and Aqua, but do not help one another in sin and transgression. So if they run a bank, and they engage in a robot based transaction, they're engaging in sin, they're engaging in transgression, they're transgressing the

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laws of Allah. So we should not make our platform our property, our wealth which Allah has bestowed upon us to be used for promotion of that sin and transgression. Now, the view of Imam Abu hanifa in this regard is he considered it permissible to let out a place for two Riba based institution of course, in his time, there wasn't any kind of institution per se, but there were these moneylenders, etc. Imam Muhammad and Mount Abu Yusuf, who were the students of abominable hanifa, they were of the opposing views. Now, it's important to keep this in mind that much of the Hanafi school of thought that we have is not imaginable hanifa it is Mr. Mohammed and invulnerable use of mela be pleased

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with them. So may Allah have mercy upon them. So the Hanafi scholars therefore are of the view that it is macro, it is disliked that you give it however, if you fall upon a situation where there is no other buyer, or no other taker, and you need the money, because it's a means for you to survive, then it is permissible to give it only as a means of emergency. So even then, probably you are expected to give it for a brief period, maybe a short rent agreement for six months, or nine months or 11 months, and then try to wrap it up, get the money, finish, you know, pay off your dues wherever it is to start a business. Get rid of that bank. But it's considered macro, according to

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the law, the overall Hanafi school of thought I've given you the breakup. According to me, it's best to avoid it.

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Question is, is buying online and reselling it aloud if you don't own it, what I believe the questioner means to say here is that I don't own something, but I'm already marketing it as though I own it, I pick up the orders from the market, once I have the order, I go to the market, I pick it up and then I sell it, if that is what you mean, then I am afraid you cannot own sell something which you're not in possession of all right, either you make it absolutely clear that you are not in ownership of any of these commodity and that you are only acting as an agent on behalf of the seller and the buyer. So, once the order is received, you will only facilitate the process and in doing

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this facilitation of the process, you may charge a commission

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which could be included in the price of the good, you have to make it very clear. But if you try to position yourself as a seller of certain goods, which you are not owning in the first place, which you don't have a possession of then you are lying. And that is not allowed. So what is suggested is most of these people who do these sales on Amazon, they have

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agency form signed, they become agent, sales agents, so they don't own the product. But they become authorized agents to sell on behalf of the company. So you can become an authorized agent, which means you are getting a license to sell on their behalf. And so you can sell something, earn the pick up the money handed back to the company and in return you earn your commission and the Lord knows best but yes, you cannot sell something which you don't own. Okay, there's a question from Sherry Armando about the concept of ownership and how does it relate to buying and selling. He speaks about real estate where you acquire ownership.

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Have the land and then you can sell it at an increased price. So he says that the same concept of par applies to stocks as well. You buy, you buy stocks, you own it, and then you sell it. So what is the problem in it? When you buy stocks, you take ownership of a company, so technically you're selling it. Look, I know where you're coming from your question is probably from the point of view of intraday trading and speculation. intraday trading is a system where you purchase a stock in the morning, and you sell it in the afternoon, or in the evening, as soon as you get even a slight 10 price or 50% 80% gain, because the amount of quantity of stocks that you deal in is huge. So

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what's wrong in that? That's the argument. So the reason why intraday trading has been prohibited is not just one reason, but two reasons. What are the first what's the first reason number one is, you can't sell that which you don't own. Generally, what used to happen in the past was that whenever you used to buy a stock, it would take at least two to three working days for it to reflect in your account. So technically, you could not sell that which was not reflecting in your name. And that is why intraday trading was not permitted. But today, and we know how technology is improving every day, today, the moment you buy, you are probably going to get the entire stock reflecting in your

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account in a span of two to three hours. In that case, am I still prohibited from trading? Yes, not tell you the reason why I know some scholars allow it very few scholars allow it. But the reason why the larger group of scholars don't allow it is because when you are buying and selling shares, when you buy shares of a company, the company gets that money. The company is supposed to use that money in an economic activity. But when you keep buying and selling and benefiting from the differences in price caused by the demand and supply, which is because of continuous buying and selling you pushing the price up, you are creating new economic activity. Speculation doesn't produce a productive

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economic activity because the money is hardly with the company you're buying in the morning selling in the afternoon. What What is the company going to do with that kind of money. So you may become an owner of a company for a couple of hours. And then you say I'm going to sell it is not the same as selling a land. When you buy a land and you want to sell it. Firstly, no one buys land in the morning and sells it in the afternoon. They will only do it if there is a distress sale. What is a distressed sale? Where do you need the money and you bought it and now you want to sell it and in a distressed sale The price is not a factor. The factor is to get a buyer who's ready to pay a

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negotiated price. So let us not compare the two they can't be compared the two different segments altogether. Properties land real estate is different. I've given you the basis for which stocks have been prohibited. There's the question of who wants to know the ruling on foreign currency trading, the ruling on foreign currency trading is similar to the six or webapi commodities that we spoke of, considering the fact that the currencies that we are talking of is similar to the dubawi commodities because all of these rebel commodities, if you understand at some point or the other in human history was used as currencies, gold and silver was used as currencies even at the time the Prophet

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alayhi salaatu wa Salaam. So, the ruling as far as foreign currency trading is concerned is that if they are different currencies, for example, US dollar and Indian National rupee, if it is Libyan currency, with say the Egyptian currency different currencies, if there are different currencies, you can exchange them in whatever values you want, provided the transaction is completed in one sitting on the spot, I give you $10 and I take the equivalent rupees, I give you 50 dinars and I take back the equivalent dollars for it, it should be completed in one sitting it cannot be that I give you some money and then I collect it later on a future date that cannot be done. The buying and

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selling of currencies can take place in different currencies in any value if you want provided they're completed in one setting. However, if you're converting or exchanging currencies, which are of the same denomination dollar with dollar dinar with dinar, Durham when we talk about dinner with dinner, we're talking of course about the dinar of one country with the dinar of the same country All right, because I understand that the the nomenclature of dinar and Dirham may be used in different currencies for

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identifying their respective currency. So what we mean here is when we talk about their home, let's say UAE their home. So we are talking about the UAE there have been exchange with the UAE they have the Libyan dinar being exchanged with the Libyan dinar, not the Kuwaiti dinar

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Okay. So, as low if you're changing exchanging currencies of the same denomination, then it must fulfill two condition. First it should be like for like, if I give you 10 Kuwaiti dinar I take back 10 Kuwaiti dinar and second condition on the spot All right. Now, hope this is clear. So,

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the question where the question wants to know the ruling on the dividends which are paid. So, you invest in the shares of a company, there are two ways of earning it one is the increase in the valuation of the share and then sometimes towards the end of the year, the shareholders may be paid a dividend by the board of directors if the company has performed exceptionally well, what is the ruling on the dividend? As we mentioned during the session Also, if you would recall that investing into the share market per se is halaal using the delivery model not to integrate trading, but rather the delivery model. Having said that, we also gave a lot of conditions that the company must be into

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halaal business and there are a lot of other parameters which are checked on to establish whether you are permitted to invest in that company or not. Let us assume that in all of those aspects that company is sherea permissible, if you invest in them, if you earn dividend from those companies once in a year when a dividend is announced, it is permissible there is nothing wrong in that. We know that dividends which are normally announced are announced as a percentage, but this percentage is not a fixed percentage. It doesn't have a fixed time this year it could be 5% next year, it could be 10% they could probably not give you any dividend in the third year. So, there is nothing which is

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following a fixed model or right. Sometimes the company is doing well they may keep paying you 10% every year but that is never a condition dividend is never conditioned that it has to be paid every year. So per se dividend is allowed. You can certainly earn money through dividend nothing wrong with that and Allah knows best