MAKE YOUR BUSINESS SHARI'AH COMPLIANT – II

MAY 2003 / 1424

[ transcript of a talk by Mufti Ebrahim Desai at the Shari'ah Compliant Business Campaign of Darul Ifta, Madrasah In'aamiyyah, Camperdown ]

Once again, I welcome each and everyone of you to our Shari'ah Compliant Business Campaign – The Sure Way to Attain Barakah (blessings of Allah) in our business.

To make our business Shari'ah Compliant is indeed the sure way to attain Barakah. I substantiate my claim with the incident of Mi'raaj.

When Rasulullah (Sallallaahu Alayhi Wasallam) was physically in the court of Allah Tabaarak Wa Ta'ala, he made a heavenly declaration. The meaning of which is 'All my verbal worship, all physical worship and all monetary worship is for Allah.'

Upon that Allah Tabaaraka Wa Ta'ala replied, 'May peace, may Allah's mercy and may Allah's Barakaat be upon you, Oh Nabi.'

Upon that Rasulullah (Sallallaahu Alayhi Wasallam) responded. The meaning of which is, 'May peace be upon us and upon the pious servants of Allah.'

This heavenly discussion was being heard by Jibraaeel (Alayhis salaam), who then responded, 'Ash-hadu anlaa ilaaha illallaahu wa ash-hadu anna muhammadan Abduhoo wa rasooluhu.' The meaning of which is, 'I bear witness that there is no one worthy of worship but Allah and I bear witness that Muhammad (Sallallaahu Alayhi Wasallam) is the slave and messenger of Allah.'

The importance of Tashahhud can be understood from a Hadith: Hadhrat Abdullah ibn Mas'ood (Radhiallaahu Anhu) states that Rasulullah (Sallallaahu Alayhi Wasallam) caught my hand and taught me the Tashahhud like teaching me a Surah of the Qur'aan. To recite Tashahhud in Salaat is compulsory. If a person forgets to recite the Tashahhud, he has to compensate for it by making Sajdah-e-Sahw.

In the explanation of Tashahhud, Allaamah Sayyid Tahtawi (RA) states that Rasulullah (Sallallaahu Alayhi Wasallam) made 3 heavenly declarations:

The first is Attahiyyaatu lillaah, 'All verbal worship is for Allah.' Upon this declaration, Allah replied, 'Assalaamu alayka.' Which means 'If all verbal worship is for Me, then indeed My peace is upon you.'

The second heavenly declaration is wassalawaatu, 'All physical worship is for Allah.' Upon this declaration, Allah said, 'wa rahmatullaah' which means, 'If your physical worship is for me, then indeed My mercy is upon you.'

And the third heavenly declaration is 'wattayyibaatu', 'All monetary worship is for Allah.' Upon that Allah said, 'wa barakaatuhu' Which means, if your monetary worship is for Me, then indeed My barkaat will be upon you. 

When Almighty Allah Tabaaraka Wa Ta'ala calls Nabi (Sallallaahu Alayhi Wasallam) to Him in the heavens and tells him, 'Wabarakaatuhu', if your monetary worship is for Me, you do your business the way I want you to do it, then certainly you will have my Barkaat in your business,' What doubts and reservations do we have that conducting our business according to Shari'ah is the sure way to attain Barkaat (the blessings of Allah) in our business.

In our daily Salaat including the emphasised Sunnats and Witr Salaats we recite the Tashahhud at least 17 times daily in which we renew the pledge, 'Wattayyibaatu'.

The pledge, 'wattayyibaatu' should be so strong that it motivates us to make our businesses Shari'ah Compliant and upon that sincere pledge, Allah Ta'ala responds, 'and my Barkaat is upon you.'

My dear brothers, the aims and objectives of the Shari'ah Compliant Business Campaign is to:

a) Identify un-Islamic activities in the business sector;

b) Create an awareness of those un-Islamic activities; and

c) Provide Shari'ah alternatives for those un-Islamic activities wherever possible.

We hope this campaign will be a means of the pleasure of Allah Ta'ala and Barakaat in our business, Aameen.

I now proceed with attempting to fulfil the aims and objectives of the Shari'ah Compliant Business Campaign according to the sequence in the sheet that has been circulated to you.

Activity 1) Partnership

Almighty Allah Tabaarak Wa Ta'ala gives us the incident of (the dispute) between the partners which was arbitrated by Dawood (Alayhis salaam). One partner very eloquently presented his case and said, 'This is my Muslim brother. He has 99 sheep and I got only one sheep.' 'He says I must give him my one sheep and is he over-dominant in his speech.'

Dawood (Alayhis salaam) replied, 'Your brother has oppressed you by asking you to add your one sheep to his flock of sheep.'

Upon this, Allah Ta'ala says,

'And verily many partners oppress one another, but those who have Imaan and do righteous deeds.'

If a person's Imaan is strong, he has firm belief and conviction that Allah Tabaarak Wa Ta'ala is my sole provider, he will conduct his partnership with fairness and equity.

My dear brothers and respected elders, in light of the different queries received by the DarulIfta regarding partnership and in light of the commercial mediations and arbitrations conducted by the Med/Arb Council of the Darul Ifta (Mediation / Arbitration Council of the Darul Ifta), I propose to highlight some incorrect aspects of partnership with the alternatives.

1) The partnership that is common among our people is Mushaarakah which is also known as Shirkat-e-Amwaal

This is when 2 or more persons invest their capital in a joint enterprise. It is a common practise for partners to stipulate the proportion of the profits to be distributed to the capital investment, for example, you and I enter into a partnership of R1,000 each, that is R2,000. We agree to distribute the profits at 50% of R2000, which is R1000. That is incorrect. What is the difference between that and stipulating a straightforward return of R1000. What if the joint enterprise did not yield R1000 profit or what if the joint enterprise suffered a loss?

The alternative is the proportion of the profits to be distributed must be in proportion of the profits itself and not the capital. For example, you and I invest R1000 each, that is R2,000. We agree to share 50% of the profit. Whatever profits we get from R2000, it could be R1000, it could be more or less, we will share 50% of the profits.

It is also important to note that the proportion of the profits to be distributed to each shareholder does not have to be in proportion to the shareholders capital investment. It can be more or less.

For example, you and I enter into a partnership at R1,000 each. Both of us contributed equally. It is not necessary that the profits be distributed equally at 50%. Your share of the profit can be 60% and mine could be 40%

However, if there is a loss, then the proportion of the loss will be according to the proportion of capital investment. In the example cited of R1000 capital investment from both partners, should there be a loss, each will bear only 50% of the loss, not more nor less.

2) A very common problem experienced in partnership is terminating the partnership

If one of the partners wish to terminate the partnership before the date of maturity, he may request his partners and come to some mutual agreement. However, generally, there is a dispute on the value of the share and the partner demands liquidation of the partnership. That can cause irreparable damage to the partnership.

As an alternative, many contemporary Fuqahaa have ruled that when entering into a partnership, each partner must expressly agree, that the joint enterprise will not be liquidated until all or the majority shareholders agree on that. This is based on the Hadith.

According to that agreement, if a partner wants to come out he may sell his share to the other shareholders at a mutually agreed price or else remain there until the date of maturity. He cannot compel the shareholders to liquidate the partnership before the date of maturity. In this way, the joint enterprise can be saved from irreparable harm.

3) One type of partnership that is common today and is widely advertised is the Equity Funds

There is a difference between a simple partnership and an equity Fund. In a simple partnership policies are made by consensus of all the shareholders and each shareholder has a veto power. That is not so with shareholders in an equity fund.

It is permissible to invest in equity funds on condition:

a)  The investment must be in a Shari'ah Compliant company. That is the business of the company must be according to Shari'ah. If the business is not according to Shari'ah, for example, Commercial Banks, it is not permissible to invest in such a company.

b) The terms and conditions of the investment must also be Shari'ah Compliant. Merely investing in a company dealing with Halaal commodities is not sufficient. I normally say it is not just buying the bread that is important, is how you buy the bread that is equally important. The rules of Shirkat (partnership) must govern the equity fund and that is why I emphasise that before investing with any equity fund, enquire if there is a full-time in-house Aalim that is well-acquianted with the Shari'ah Laws of business to supervise the Shar'ee aspects of the investment. If there is no full-time in-house Aalim, do not invest there.' I recall in one brochure, a particular Mufti's name was mentioned as having approved of their fund. When I enquired from the Mufti, he stated that they met me on a consultative basis and that did not approve of the fund. I, therefore, urge all of you to exercise extreme precaution and make your own investigation to see if there is indeed a full-time Aalim and do not be misled by commercially motivated advertisements.

c) When a person invests in an equity fund, he must enter with the understanding that there is a risk factor involved. If there is a profit, he will earn a share, but if there is a loss, he will have to bear a loss as well. The concept of 'guaranteed returns' is incorrect.

Before I proceed with the next activity, I want to advise, Allah Ta'ala says:

'There is no secrecy of three people but the fourth is Allah, and there is no secrecy of five people but the sixth is Allah.'

In the context of partnership if you are two partners. Remember, the third is Allah if you are three, the fourth is Allah. If you are committed to your partner, you are first committed to Allah. If you cheat your partner, you cannot cheat Allah. You will be cheating yourself and be deprived of the Barkaat of Allah.

Activity 2) Ijaarah (Hiring)

In principle, a person may hire the services of a person or an item. If a person hires the services of a person, that constitutes an employer / employee relationship and if a person hires the benefits of a house, shop, etc. the constitutes a landlord and tenant relationship.

The general principle in hiring is that the contract must be absolutely specific. There should be no ambiguity in the contract. Should there be any ambiguity that has a potential of a dispute, the contract will be invalid. In many cases, disputes between employers and employees, between landlords and tenants are due to not having proper contracts or not having any contract relying on personal relationship.

I have mentioned before and I mentioned again, 'Deal like strangers, live like brothers'. If you don't adopt this attitude in your dealings, you will end up being strangers to your family and friends.

The concept of Ijaarah (hiring) is mentioned in the Qur'aan. Allah Ta'ala gives us the incident of Musa (Alayhis salaam) and Shu'ayb (Alayhis salaam). When Musa (Alayhis salaam) escaped from Misr and came to Madyan, he assisted the daughters of Shu'ayb (Alayhis salaam) to draw water from the well. They, then requested their father Shuayb (Alayhis salaam), then hired Musa (Alayhis salaam) for 8 years.

I now proceed with discussing some aspects between the employer and employee.

An employee is an Amin without Zamaanat, i.e. trustee without liability. An employee must take care of what he is entrusted with. He cannot embezzle in the trust. However, if he breaks or damages any property of the employer, he will not be responsible if there was no abuse or negligence on his part. If there was abuse or negligence on his part, then only he will be responsible.

Many employers are known to deduct an amount from the salaries of their employees for broken or damaged items without ascertaining if there was abuse or negligence by the employee. This is incorrect. If that money is left in the business, the profit from that money will not be Shari'ah Compliant.

Remuneration

According to Shari'ah, Muslims residing in a non-Muslim country are bound to follow the laws of that country if they are not un-Islamic. Furthermore, Muslims should live with dignity and honour. They should not do anything that will bring disgrace upon them.

Rasulullah (Sallallaahu Alayhi Wasallam) said, 'It is not behoving for a believer to humiliate himself.

When a person violates the laws of the country and is convicted, he humiliates himself. Furthermore, there is a possibility of him bringing the entire Muslim community into disrepute, especially today when there are so many journalists trying to sell their articles to the media. The media is known to cause a storm in a tea cup. We advise when you deal, do so in a responsible manner. The respect of the entire Ummat is on your shoulders. I reiterate, the respect of the entire Ummah is on your shoulders.

Reverting to the subject matter: According to the 2003/2004 financial year, every employee who earns R2500 or more is required to pay PAYE. We are aware of many employers deducting the PAYE and do not pay it to the receiver. The money remains in the business. This is incorrect. The employer is the agent of the government in collecting the PAYE. The collected amount must be handed over to the government. The employer cannot keep that amount in the business and make a profit with that. The profits will not be Shari'ah Compliant.

All of us are aware of the law to register our domestic workers and contribute 1% of the gross salary to the UIF.

Remember brothers today according to the political climate of South Africa, we still have a chance to make Ihsaan and act favourably to our fellow indigenous citizens. It is an opportunity to give Da'awah to them. It is time we change our attitude and impress upon them the Islamic values and ideals.

The time is imminent, in view of the affirmative action that is entrenched in the South African constitution that they will be totally independent of us and the opportunity of Da'awah through a personal relationship will be lost forever.

Contract of Restraint

There are some people that deal in skilful trades. They fear that their employees will learn the skill and after leaving employment, the employee will deal in the same trade. In order to secure themselves against competition, they sign a contract of restraint with their employees which implies that the employee cannot enter into the same trade as his former employer. According to Shari'ah, the contract of restraint is not permissible. Rasulullah (Sallallaahu Alayhi Wasallam) said; 'Muslims must adhere to their conditions but that condition which make Halaal Haraam and vice versa.'

It is perfectly Halaal for the person to enter into any trade he wish to. The restraining contract seeks to make that Haraam.

Terminating the Employer / Employee Contract

a) Once an employer and employee have entered into an agreement, then neither party has the right to cancel the agreement without a valid Shar'ee reason. If there is a valid Shar'ee reason, then the contract can be cancelled. If there is a dispute regarding the legitimacy of the contract, then the matter must be adjudicated.

For example, if a factory is destroyed, then the owner can lay off his workers without adjudicating the matter. But if he foresees a decline in the market, then he will have the matter to be adjudicated.

b) Similarly, if an employee becomes terminally ill, then he can leave his work without adjudicating the matter. But if he wants to move from one place to another, or to take a new job, or if he is not happy about his wages, or the amount of work he has to do, he cannot terminate the contract without adjudicating the matter. In such a situation, it is advisable for the employer and employee to amicably resolve the disputes between themselves.

Adjudicating the matter does not mean that the matter must go to court, where each party spend exorbitant amount of money in hiring attorneys and advocates and finally the matter goes to the court which is indeed a circus of technical arguments. I strongly advocate that a neautral body be identified to mediate / arbitrate the dispute. Alhamdulillah, this service is provided gratis by the Med / Arb Council of the Darul Ifta. Many members of the business community are aware of this through their personal experience with us. I also take the opportunity to inform you that the Med / Arb Council is about to be registered and our awards will be recognised and enforceable in courts, Insha Allah.

I now proceed with the relationship between the Landlord and Tenant.

There are often disputes between the Landlord and Tenant regarding the maintenance of the hired property.

According to Shari'ah, the Landlord is the owner of the property. Any liabilities emerging through ownership will be the responsibility of the Landlord. For example, paying the rates and taxes, repairing the water pipes, etc. That liability cannot be imposed on the tenant. That is the responsibility of the Landlord.

If the liability is due to the use of the Tenant, for example, electricity bill, etc. then obviously, that is the Tenant's responsibility if the Landlord did not take the responsibility of paying the light bill.

The Tenant cannot violate the terms of the contract or use the property against the terms of the contract. If he wishes to do so, he must get the consent of the Landlord if he wishes to use the property for an abnormal purpose.

If the Tenant has caused damage to the property due to misuse or negligence he will be liable to compensate the Landlord, but if the property has been damaged due to circumstances beyond the Tenant's control that will be the Landlord's responsibility.

Before I proceed with the next activity, I want to leave you with a parting comment in the context of Landlord/Tenant relations. Moulana Ashraf Ali Thanwi (RA) advised, 'Always respect three people, don't display arrogance in front of them, a) Saahib-e-Amr (the person who got the law in his hands), b) The Landlord, c) The son-in-law.

Activity 3) Diminishing Partnership

I have discussed with you partnership and hiring. Now I will discuss a concept, that is a combination of both – Partnership and Hiring.

For example, I want to purchase a house that is valued at R200,000 but I have only R100,000. I do not have the option of obtaining an interest free loan nor do I want to take an interest bearing loan. You have the money. I approach you for a loan, but if you do not have the courage to offer a loan, then you may enter into a partnership with me. Both of us contribute R100,000 towards the house and become equal partners. For legal expediencies, the house will be registered on my name.

I then pay you rentals for occupying your 50% portion of the house and in every 3 months, for example, I purchase one quarter of your share of the house and in one year, I purchase the entire house.

As I purchase one portion of your house, your share of the house will decrease and the rentals that I pay you will also decrease and adjusted accordingly. This form of partnership is ideal to people who want to save themselves from taking interest bearing loans and for people who are looking for investments. As Muslims, we should assist one another to empower ourselves. Remember, after Imaan and A'amaal-e-Saalih, economic empowerment is a very strong and formidable force in any nation. You rather empower your Muslim brother who will give Sadaqah to the Musjid, Madrasah, Darul Uloom, etc. All that reward will come back to you.

Activity 4 – Delivery Costs

Very often, we are faced with a situation where a person purchases an item and it requires to be delivered and the purchaser did not receive the item. The seller demands payment and the purchaser refuses payment. This leads to a dispute.

In principle, when a person purchases an item and requires it to be delivered, it is the seller's responsibility to deliver the item to the purchaser. If the item is lost, it will be the seller's responsibility and not the purchaser's responsibility. The seller can deal with his transport agency or post office by himself. However, if the seller informed the purchaser that he does not take responsibility of delivery, then it will not be the seller's responsibility. The purchaser may hire the services of a transport agency or the post office to have the purchased item delivered to him. If the item is not delivered, then too he is responsible for payment to the seller.

Activity 5 – Short Sales

It is a common practice among many dealers to sell items to their customers which is not in their possession. They then tell their suppliers, for example, the factory, to deliver directly to their customers. This practice is incorrect.

It is mentioned in the Hadith: Rasulullah (Sallallaahu Alayhi Wasallam) prohibited from selling any item before taking possession of it.

The reason for the prohibition is that there is a possibility that the dealer might not even obtain the item to ensure delivery to the customer.

The Fuqahaa have stated that the dealer must obtain physical possession of the item or at least constructive possession before selling the item. Constructive possession is that there must be no obstacle for the dealer to take possession of the item. If physical or constructive possession takes place, then only the item may be sold. In that situation, the item is in the dealer's responsibility and if the item is lost, he will be responsible and not the supplier. When the dealer takes an order from a customer, it is merely a promise to buy and sell. That does not constitute a deal.

Activity 6) Securing Shelter for the wife after husband's death

When a person passes away, all his assets including the house form part of the nett estate. It often happens that the heirs demand their share of the house and the house is also liquidated. The wife, who may be the mother or step mother of the heirs, is left stranded.  She does not have sufficient money to purchase her own house and she does not want to stay with any one.

In view of this difficulty and in order to secure shelter for the widow, I have examined many wills and observed that some people put a clause of usufruct in their wills. That is the widow will be entitled to use the house until her death. In the terminology of Fiqh, this is called Umrah. According to Imaam Abu Hanifa (RA), Umrah or bequest of Usufruct for an heir is incorrect. Rasulullah (Sallallaahu Alayhi Wasallam) said, 'There is no bequest for an heir'.

I may also advise when you draw up your will and consult an attorney, have that checked by Ulama who are well-versed in that field. While the will must comply with legal requirements, it must also be Shari'ah Compliant. The alternative is to create a Waqf (an endowment policy) in which he may state that his widow will be entitled to usufruct until her death, then his heirs. An important feature in Waqf is that it must be an unending avenue. In other words, the house must finally go to the poor/needy or any charitable organisation, for example, Madrasah Darul Uloom, etc. The endowment policy can be designed according to one's suitability.

Activity 7) Purchasing American and British Products

Before I discuss this sensitive issue, I must express grief and agony at the stagnancy of our Muslim community. The majority of our people have been in wholesale or retail business and remain there. They did not make inroads in other fields. Other people have progressed. They have gone into farming and manufacturing and have become suppliers rather than being supplied. Why don't we take that route and become suppliers instead of being supplied. Then there will be no need to discuss purchasing American and British products.

In the absence of products manufactured by Muslims, from the Shari'ah point of view, it is permissible to purchase products manufactured by non-Muslims. Before making any move, in any angle, we should also take into consideration the economic consequences of our fellow Muslims. We are a very emotional Ummat and make decisions based on emotion, that can be very detrimental to us. What we need to do is not boycott American and British products, but boycott the western culture in our lives and adopt the Sunnah. There is absolutely no logic in boycotting some of their products while we imitate their lifestyle in every walk of our lives. Even if you boycott their products, they are still with us.

Activity 8) Eating at Food Outlets

We have been inundated with queries regarding eating at food outlets not certified as Halaal by any Halaal certifying body, e.g. SANHA, ICSA, MJC, NIHT, etc.

At the outset, we must state that a Muslim must exercise precaution in Halaal and Haraam. According to Shari'ah, the information of an Aadil Muslim regarding the food being Halal is sufficient. An Aadil Muslim is he who is sensitive to Deen, and is well versed with the laws of Halaal and Haram. If he states that the food is Halaal, then from the Shari'ah point of view, it is permissible to accept his word.

It is not necessary that be further sanctioned by any Halaal authorising body. Muslims Halaal outlets not having certificates should not suffer due to not being certified by any Halaal authorising body. They should be given the independent opportunity to prosper without any hinderance by any commercially motivated certifying body.

Activity 9 – Commonly Asked Questions

1. In principle, if an item is Haraam, for example, canned meat for cats and dogs, the income of that will be Haraam. If an item has dual or multiple purposes, it can be used for a permissible act, and an impermissible act, for example grapes, etc. it can be eaten as fruit and it could be used to produce wine, then it is permissible to sell such items. However, if one is certain that the item will be used for an impermissible act, then it cannot be sold to that specific customer. Allah Ta'ala says,

'And do not assist in sin.'

This principle will answer queries pertaining to many products in the market, for example, Mnandi Beer Powder, King Korn, etc.

2. It is not permissible to sell items, including clothes having pictures of animate objects on them.

3. The discounting of postdate cheques is not permissible.

4. Handling charges – according to Shari'ah, when a customer returns an item, that is Iqaalah, dissolution of transaction. It must be on the original amount. The seller cannot take any amount as handling charges. Rasulullah (Sallallaahu Alayhi Wasallam) said,

'Whosoever accepts a dissolution in transaction with a person who requests a transaction, Allah will forgive his sins.'

5. Consumer credit: We addressed this issue last year and have been requested by many to repeat that. I will do so, with an example: I purchase a car from you for R50,000. The CCC pays you out and I pay the CCC R50,000 on instalments. However, CCC may charge you a fee for some other services provided for example, adverts, etc.

Activity 10 – Advices and conclusion

As believers, we should be conscious of death, life after death and accountability in the court of Allah. The more conscious we are of this, the more upright we will be. Rasulullah (Sallallaahu Alayhi Wasallam) said, 'A person will not move on the day of Qiyaamat until he is asked 5 questions.'

One of the questions, 'Where did you own your wealth and how did you spend your wealth?'

In conclusion, I leave you with a parting comment.

If our pledge is sincere, Allah will assist us in making our businesses Shari'ah Compliant and putting Barakah in our business. May Allah Ta'ala accept this campaign and give us Tawfeeq to make our business Shari'ah Compliant, Aameen.

Read also:

• Make Your Business Shari'ah Compliant I (August 2002)
• Make Your Business Shari'ah Compliant - III