Essays In Islamic Finance III: Essays In Islamic Finance, #3

By Nizar Abdulrahman Alshubaily

The third volume of Essays in Islamic Finance explores more controversial topics in the Islamic Finance industry.

Why do many believe more is forbidden when in fact more is permissible?

What is "Fatwa Shopping" and why is it that it really does not exist except as a figment of people's imagination?

Is paper money haram or is there a sound fundamental basis and precedent for its permissibility?

What does it take to become an expert in Islamic Finance?

What are some fundamental principles to follow within the Islamic Finance industry?

Why is the criticism of our scholars unfair and innacurate?

• Language: English
• Publisher: Nizar Abdulrahman Alshubaily
• Release date: Apr 23, 2022
• ISBN: 9798201360801

Book preview

In

Memory

Of

My

Parents

Also By The Author

Riba Revisited Series:

Riba In Mubadalah

Riba In Jewelry

Riba Complexity

Riba In Contracts

The Book Of Quotes

The Names Of Riba

A Sale Is Like Riba

The Hadith Of Riba

Myths Of Riba

The Verses Of Riba

Essays In Islamic Finance Series:

Essays In Islamic Finance I

Essays In Islamic Finance II

Essays In Islamic Finance

Volume III

Copyright © Nizar Abdulrahman Alshubaily, 2022

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded, or otherwise, without prior written permission of the copyright holder, except for reference and citation, with proper acknowledgment.

Cover Page: Photo of Manuscript of Sahih Al-Bukhari courtesy of Alukah.net

EBOOK ISBN: 9798201360801

Essays In Islamic Finance

Nizar Abdulrahman Alshubaily

A Collection Of Contemplations

On The Islamic Banking Industry

Volume III

2022

Introduction

This is the third volume of Essays In Islamic Finance.

As in the first two volumes, this is also divided into two parts. Part I covers foundational concepts relevant to any student of the industry, while Part II is a group of essays elaborating my thoughts on the industry.

So many individuals seem to believe that there is more that is forbidden than permissible. This of course is not true, and especially in the arena of financial transactions, whose fundamental basis is permissibility. I elaborate on the issue of The Forbidden in the first chapter. This issue is of such fundamental importance to any study of Islamic Finance. The belief that more is forbidden impacts directly the reputation of the Islamic Finance industry as well as the process of product development. Such a bias can reduce innovation in the industry, as well as creating a suspicious view of the products the industry offers.

Then I deal with the mythical Fatwa Shopping accusation that bears a striking resemblance to the Loch Ness Monster, often talked about, yet non-existent. This is simply one of many insulting accusations that keep being levied on the Islamic Finance industry with no basis in reality and no proof. Unfortunately, when a term becomes popular such as this one, many begin to believe that it is true. A lack of understanding of how scholars work and interact leads to a belief that any scholar can simply invent any fatwa he wishes to permit what is forbidden. Of course this is complete nonsense.

The third chapter deals with the nature of money, specifically paper money, which many seem to view as Haram, and that money in Islam is only gold and silver. This is yet another myth that will not rest.

The main objective of the first part, as in the first two volumes is to remove misunderstandings, some of which are extremely entrenched it seems.

Part II, Essays, covers several topics, the two most important ones are chapter six and seven, where I provide some of my experience in Islamic Banking, in the hope that future students find it easier to navigate the sometimes confusing landscape.

I reiterate my views on the integrity of scholars and the soundness of their judgment. I also describe some lessons learned from a long experience within the industry.

Nizar Abdulrahman Alshubaily

April 2022

Part I - Foundations

Chapter One: The Forbidden

Chapter Two: Fatwa Shopping

Chapter Three: Paper Money

Chapter One

The Forbidden

The basis of all contracts is permissibility, except that which has been forbidden by Allah or his Messenger (PEACE BE UPON HIM), and Allah has not forbidden any contract which is of benefit to people unless it contains an overwhelming corruption.

Ibn Taymiyyah *

Many critics and observers use terms such as Haram Forbidden far too easily to describe some financial and commercial structures. 

This stems from three main issues:

The view that in Shari’ah the Forbidden is the majority while the Permissible is the minority. Or perhaps some regard this as more pious.

The lack of knowledge of what constitutes a Forbidden structure. This is simply a lack of awareness of the basics of Fiqh Al-Mu’amalat.

Certain unease related to the similarities between some Conventional products and Islamic structures.

I see these views a lot, in writing and in verbal discussions. The list of errors of what Shari’ah actually forbids is endless it seems. Many regard Paper Money as forbidden, some regard the use of LIBOR as forbidden, and many regard debt as forbidden, while others insist that even having a bank is against the spirit of Shari’ah. 

Yet others regard a margin on a Deferred Payment Sale as akin to Riba. Some view any guarantee provided in a transaction as forbidden, and do not know you can transfer debt.

None of these are forbidden. But it is very important to note that there are conditions for ensuring such acts are Shari’ah-compliant.

I believe part of the problem could be that people view the word forbidden as a better default until proven otherwise. They regard it as more prudent and perhaps more pious. I can understand that. However, pausing before entering into a transaction and asking for more information from knowledgeable scholars is far different from stating that the transaction is forbidden. Haram is a very big word and should be used only with serious knowledge, as it is as equally wrong to permit what is forbidden, as it is to forbid what is permissible.

Ibn Rajab (Died Hijri 795) goes to a lengthy explanation concerning Halal and Haram:

We have mentioned before about godly scholars such as Ahmad (bin Hanbal), and Malik (bin Anas), their prudence in describing an issue as Haram without absolute knowledge of it being forbidden...it has been established that the origin of things is permissibility by the evidences of Shari’ah, and some have reported consensus on this issue... (1)

Perhaps also, many observers have not had experience in discussions with scholars and have some image that scholars tend to forbid more than they permit. Not true. In my experience, scholars were always hesitant to forbid until they have clear proof.

It is important for people to know that the basis of commercial transactions in Shari’ah is permissibility unless there is a reason to forbid. This is a fundamental principle that has always been followed in transactions. 

As Dr. Sa’ad Al-Khathlan, a former member of Saudi Arabia’s Council of Senior Scholars states in his book on modern financial transactions:

What Allah Almighty has permitted is more than what he has forbidden. The Fundamental basis of transactions is permissibility... Therefore, if two individuals differ as to the permissibility of a transaction, the one who is asked for proof is the one who claims it is forbidden. But he who says it is permissible has the fundamental basis and is not asked for proof. (2)

Here also we must pause and remember well the words of the great scholar Ibn Taymiyyah (Died Hijri 728) who stated the following in The Book of Contracts:

Everything that is of benefit to people, and has not been forbidden by Allah or his Messenger (PEACE BE UPON HIM) is Halal, and no one has the right to forbid it...The basis of all contracts is permissibility, except that which has been forbidden by Allah or his Messenger (PEACE BE UPON HIM), and Allah has not forbidden any contract which is of benefit to people unless it contains an overwhelming corruption. (3)

Ibn Taymiyyah re-iterates this issue in his Fatawa:

"The basis of customs is to pardon, nothing in them is prohibited unless forbidden by Allah, otherwise we risk entering into the meaning of: {Say, Have you seen what Allah has sent down to you of provision of which you have made [some] lawful and [some] unlawful? Say, Has Allah permitted you or do you invent [something] about Allah"} (Verse 59 Of Surat Yunus). This is why Allah has vilified the unbelievers, because they allowed