The ethical framework for a Muslim investor
Money, money, money. Doesn’t it make your head spin sometimes? Think of all the things you can do if you just had a little more…
Unfortunately, this compelling greed and need sometimes drives us to make financially unsound decisions, and worse still, even un-Islamic ones. The following article outlines various aspects of Islamic financial dealings, from paying the one you hire to what not to pay when you owe someone. There are so many evidences with regard to Islamic finance that they cannot and must not be ignored. If you ever intend to spend another dollar, you must read on.
The Hirer and the Laborer
Nothing bonds employees to their place of work more than the fulfillment of their contractual rights, including receiving their wages on time – such treatment fosters loyalty and a sense of belonging as well as financial security for themselves and their family. The Prophet (may Allah exalt his mention) said: “Give the laborer his wages before his sweat dries away.” [Ibn Maajah]. He gave a stern warning to those who do not meet their obligations by saying: “Allah Almighty Said (what means): ‘I will be an opponent to three types of people on the Day of Resurrection: one who makes a covenant in My name, but proves treacherous; one who sells a free person and eats his price and one who employs a laborer and takes full work from him, but does not pay him for his labor.’” [Al-Bukhari].
Our Wealth and Charity
However, the highest among the list of financial obligations is that of our obligation toward our Creator. The rich begin to fulfill this obligation by giving Zakah to the poor and they continue the fulfillment by giving charitable donations whenever needed. Fulfilling one’s obligation towards Allah purifies the capital from inadvertent errors and suspicion, as well as purifies the soul from stinginess and selfishness.
Charity does not eat away capital, rather it increases it. On the other hand, withholding Zakah is a direct reason for bankruptcy. When people withhold Zakah, Allah withholds rain from them and if it were not for the sake of preserving cattle and wildlife, the rain would cease altogether. Evidence abounds on these issues from both the Quran and Sunnah.
Allah Says (what means): “… And those who hoard gold and silver and spend it not in the way of Allah – give them tidings of a painful punishment. The Day when it (the gold and silver whose Zakah was not paid) will be heated in the Hellfire and seared therewith will be their foreheads, their flanks and their backs, (it will be said), ‘This is what you hoarded for yourselves, so taste what you used to hoard.’”[Quran 9:34-35].
Allah also Says (what means): “And those within whose wealth is a known right (Zakah). For the petitioner and the deprived.” [Quran 70:24-24].
And in another verse, Allah Says (what means): “Take, (O Muhammad), from their wealth a charity by which you purify them and cause them increase, and invoke (Allah’s blessings) upon them. Indeed, your invocations are reassurance for them. And Allah is Hearing and Knowing.” [Quran 9:103].
The Prophet said: “No owner of treasure who does not pay Zakah (would be spared) but (his hoard) would be heated in the Hellfire. These would be made into plates and with these, his sides and his forehead would be cauterized till Allah pronounces judgment among His servants during a Day, the extent of which would be fifty thousand years. He would then see his path, leading either to Paradise or to Hellfire…” [Muslim].
One has only to regard the effect that Zakah has on society to recognize its importance. The money is paid by the rich in order to fulfill their obligation towards Allah, and then used by the poor to relieve their suffering. In a society where giving and receiving are carried out in good faith, the poor live peacefully with the rich in a flourishing and stable solidarity. The Prophet gave an example of this society by saying: “When the Ash’arites run short of provisions in the campaigns or run short of food for their children in Al-Madeenah, they collect whatever is with them in a cloth and then partake equally from one vessel. They are from me and I am from them.” [Al-Bukhari].
Avoiding Ribaa (Interest)
A careful analysis of the history of civilizations reveals a common root to all turmoil and political unrest – and that root is usury. This is the reason why Islam took an extremely firm stand on the issue of interest.
Muslim investors should be extremely careful to avoid engaging in transactions involving interest or in any transaction involving interest masquerading as a seemingly lawful transaction.
Allah forbade interest and threatened those who take it with severe punishment, when He Says (what means):
“Those who consume interest cannot stand (on the Day of Resurrection) except as one stands who is being beaten by Satan into insanity. That is because they say: ‘Trade is (just) like interest.’ But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns (to dealing in interest or usury) – those are the companions of the Fire; they will abide eternally therein. Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.”[Quran 2:275-276].
Allah Almighty declared war against those who take interest and encouraged lenders to be patient with borrowers to the point of absolving them from all, or part, of the loan in the following verse, when He Says (what means):
“O you who have believed, fear Allah and give up what remains (due to you) of interest, if you should be believers. And if you do not, then be informed of a war (against you) from Allah and His Messenger. But if you repent, you may have your capital – (thus) you do no wrong, nor are you wronged. And if someone is in hardship, then (let there be) postponement until (a time of) ease. But if you give (from your right as) charity, then it is better for you, if you only knew.”[Quran 2:278-281]
Islam’s ruling on taking interest is very straightforward and severe. It is considered to be one of the seven mortal sins. The Prophet said: “Avoid the seven great destructive sins.” The people inquired: ‘O Allah’s Messenger! What are they?’ He said: ‘To join others in worship along with Allah, to practice sorcery, to take the life which Allah has forbidden except for a just cause (according to Islamic law), to eat up Ribaa (usury), to eat up an orphan’s wealth, to show one’s back to the enemy and fleeing from the battlefield at the time of fighting; and to accuse chaste women, who do not have any unchaste thoughts and are good believers.’”[Al-Bukhari].
The Prophet went on to curse the taker of interest, its payer and also the one who records it, including the two witnesses. He said: “They are all equal.” [Muslim].
The Prophet further said: “This night I dreamt that two men came and took me to a holy land whence we proceeded on till we reached a river of blood, where a man was standing, and on its bank was standing another man with stones in his hands. The man in the middle of the river tried to come out, but the other threw a stone in his mouth and forced him to go back to his original place. So, whenever he tried to come out, the other man would throw a stone in his mouth and force him to go back to his former place. I asked: ‘Who is this?’ I was told: ‘The person in the river used to eat Ribaa.’” [Al-Bukhari].