If you are not able to find an answer to your question, you can submit a new question by clicking here. What is the ruling on trading, selling and buying in digital currencies such as Bitcoin and other currencies? His Eminence Sayyid al-Sistani has not answered this question yet due to a lack of sufficient information [related to the specifics, transactional procedures and valuation of bitcoin]. However, it would be useful to give the following explanation as guidance and general education until the Office in Holy Najaf issues an official a response.
For a transaction to be valid and acceptable from a jurisprudential i. Islamically standpoint, these four components must be clearly defined and clarified for both the buyer and seller in the market. But in an economy based on Islamic principles, the idea of man representing God on earth gives businessmen a feeling of co-operating with others for the good of society as a whole, including himself. Thus Quranic guidance enables man to conserve and use prudently all the resources of the earth that God has given mankind. Divine Guidance for the economy, as enshrined in the Qur'an and the Sunnah the living example of Prophet Muhammad , can be summarised as follows:.
The Qur'an emphasises that all the resources of the earth belong to God, the Creator, who has made human beings a trustee for them. Humans are therefore accountable to God for the uses they make of these resources. The idea of trusteeship distinguishes the Islamic approach to economics from materialistic approaches such as extreme capitalism and socialism.
It introduces a moral and spiritual element into business life and has been made practicable by creating rules to govern individual behaviour and public policy. Care for others tempers self-interest, which is ingrained in human nature. It goes naturally with trusteeship, since, in caring for others, one also serves God, who created all humans. No one can have fulfilment or happiness in his life without interacting with others. Thus individual happiness and collective interests go hand in hand.
We gain through giving, since it would be impossible for everyone to acquire while giving nothing. The Qur'an states this in and It follows that Islam discourages indulgence in luxuries. One is expected to consider what is available to others before acquiring good things for oneself. Moderation in consumption is mentioned in the Qur'an People who believe that they can increase their wealth through charging others interest and by reducing charitable giving are under an illusion.
The wealth and integrity of a society can only increase when the rich give part of their wealth to the needy for no other motivation than to please God. Those who have faith and a vision of their future life understand this. To think only of how to gain profit for oneself leads to using others as mere instruments.
In societies where unbridled self-interest is allowed to dominate unchecked, there is no protection for the weak against the strong.
Thus exclusive pursuit of self-interest, when not tempered by charity, is self- defeating. Islam emphasises the duty of every individual to work for his living.
Productive enterprise is looked upon as a means of serving God Islam requires wealth to be spent in the cause of God. This realisation moves Muslims to greater efforts in their economic activities. The fourteenth-century thinker Abu Ishaq Shatibi, writing of the companions of the Prophet, said,. They did not do so to amass wealth or save it for themselves; rather their aim was to spend their earnings in good causes. But in Islam, it is seen that working for a living gives man a sense of worthiness in his society.
To support a family and contribute to others with any surplus enables one to take one's part in consultations on practical, social matters, so that all can benefit. The aim of the Shari'ah rulings is to make the transfer of goods safe and easy and to facilitate economic transactions by eliminating vagueness or misunderstanding in all types of contracts. It prohibits the charging of interest on loans as a form of injustice.
The goal is to remove the causes of social tension or litigation and to promote a climate of peace and goodwill. Islam strongly recommends that the terms of financial agreements be put in writing. Men are free to make private economic decisions, but decisions concerning the public welfare must be based on consultation. The Qur'an describes Muslims as a people "whose rule in all matters of common concern is by consultation among themselves. Mutual consultation avoids society or local communities coming under the rule of a dictator and makes sure that reasonable decisions acceptable to all are made.
Understanding Islamic Law
Islam regards economic well being as a means to peace, freedom from hunger and freedom from fear of others, except God. Beyond the satisfaction of basic needs, the ultimate objectives of earning and spending money are moral and spiritual. It is against Islamic rationality to hoard money , It follows that savings must be put to good use. One who cannot go into business himself can do so in partnership with others, or can supply funds on a profit-sharing basis.
People can also borrow and lend, but it is forbidden for the lender to claim interest from the borrower as this is unjust Islam prohibits gambling, cheating, exploitation, coercion, etc. Islam prohibits dishonesty, fraud and deception, coercive practices, gambling and usurious and injurious dealings. Hoarding, speculation and collusion among producers and traders against the interest of consumers, and such monopolies as are injurious to the socio-economic health of society are all ruled out.
The basic principles regulating market operations in an Islamic state are:. It is left to him and depends on the business environment and the nature of the goods. However, moderation, contentment and leniency must be taken into consideration. If there are such, the State should intervene to remove these factors.
The State should insure that producers, manufacturers and traders do not exploit each other or the buyers.
It should curb adulteration, under-weighing, encroachment of thoroughfares, unhealthy trades and unlawful professions and maintain good, firm employee relationships. Industrialists in a free and competitive economy can form cartels and monopolies and exploit people and a firm law is needed to control them.
No unjust, oppressive or cheating business can be allowed to continue in an Islamic economy. Zakat is a levy on certain categories of wealth. It can be collected and distributed by the government and is obligatory only on Muslims. It is applicable to income and savings, agricultural harvests, commercial goods, gold and silver over certain amounts, some categories of livestock, excavated treasures, mined wealth, etc.
In accordance with the Qur'an , the proceeds from zakat are paid to the poor, the sick and destitute and to travellers, especially those seeking education or going on pilgrimage. The Islamic view of distributive justice is contained in the three points: a guarantee of the fulfilment of basic needs; equality of opportunity; and elimination of glaring inequalities in personal income and wealth. Zakat also acts as an excellent form of social insurance. Qard hasan is a Quranic term meaning an interest-free loan.
It was the primary source of financing introduced by the Prophet after entering Medina and was used primarily for productive economic purposes, such as setting up qualified, but poor, people in trade and agriculture. Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari'ah Islamic rulings and its practical application through the development of Islamic economics. The principles which emphasise moral and ethical values in all dealings have wide universal appeal.
Shari'ah prohibits the payment or acceptance of interest charges riba for the lending and accepting of money, as well as carrying out trade and other activities that provide goods or services considered contrary to its principles. While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to provide an alternative basis to Muslims although Islamic banking is not restricted to Muslims.
Many of these principles upon which Islamic banking is based are commonly accepted all over the world, for centuries rather than decades. These principles are not new but arguably, their original state has been altered over the centuries. It is evident that Islamic finance was practiced predominantly in the Muslim world throughout the Middle Ages, fostering trade and business activities.
In Spain and the Mediterranean and Baltic States, Islamic merchants became indispensable middlemen for trading activities. It is claimed that many concepts, techniques, and instruments of Islamic finance were later adopted by European financiers and businessmen.
The revival of Islamic banking coincided with the world-wide celebration of the advent of the 15th Century of Islamic calendar Hijra in At the same time financial resources of Muslims particularly those of the oil producing countries, received a boost due to rationalisation of the oil prices, which had hitherto been under the control of foreign oil Corporations. These events led Muslims' to strive to model their lives in accordance with the ethics and principles of Islam.
Disenchantment with the value neutral capitalist and socialist financial systems led not only Muslims but also others to look for ethical values in their financial dealings and in the West some financial organisations have opted for ethical operations.
The origin of the modern Islamic bank can be traced back to the very birth of Islam when the Prophet himself acted as an agent for his wife's trading operations. Islamic partnerships mudarabah dominated the business world for centuries and the concept of interest found very little application in day-to-day transactions. Such partnerships performed an important economic function. They combined the three most important factors of production, namely: capital, labour and entrepreneurship, the latter two functions usually combined in one person.
The capital-owner contributed the money and the partner managed the business. Each shared in a pre-determined share of the profits. If there was a loss, the capital-provider lost his money and the manager lost his time and labour. Western commercial banks date from about two and a quarter centuries ago, when the western world was dispensing with moral and ethical considerations in economics. When the Muslim world came into contact with the west, Muslims had two choices:.
But ancient Muslim institutions, such as the Shari'ah courts, had been made ineffective by the colonial powers. Muslims had no alternative but to work with the colonial institutions, including commercial banking. Nevertheless, during the 19th century, several religious scholars argued that the term riba referred to loans for consumption, which people found it difficult to repay, and not to commercial banking loans, where the debtor can repay from the profits.
But the Qur'an makes no distinction between loans for consumption and loans for productive purposes.
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So their views were rejected. As a consequence, modern commercial banking did not make much headway in Muslim countries and to this day the presents of the conventional framework still dominates the national financial system. Equity-participation systems had been proposed at various times of economic crises in the United States and Latin America.
Legal Thought and Jurisprudence
The most ardent proponent of these was American Economist, Henry Simons — , who, in the s, argued that the traditional fractional reserve banking system was inherently unstable and should be replaced by two separate financial institutions:. They could not fail the depositors and could not create or destroy effective money. They would simply accept deposits. Investment trusts, which would perform the lending functions of existing banks. Such companies would obtain funds for lending by selling their own stock.