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Islamic Rules Concerning Financial Dealings
By:
Dr. Ahmad Shafaat
(1988)
There are many examples of financial
dealings among Muslims leading to disagreements, strain in
relationships and even fights, instead of leading, as they normally
should, to strengthening the bond of Muslim brotherhood and to
mutual benefit. Almost everyone in our community must know cases, in
which two or more Muslims become partners in a business or one gives
a loan to another brother and the result is mutual pain instead of
mutual benefit.
On the basis of such examples many
Muslims have decided that it is better not to deal with other
Muslims in any way, but this negative solution is not very Islamic,
since it is not quite consistent with the spirit of Muslim
brotherhood.
A more positive solution would be to
revive the teachings of Islam regarding financial transactions;
teachings which, if revived, could make such transactions far more
pleasant and profitable and greatly increase the financial power of
the community.
FULFILLING AGREEMENTS
All dealings between human beings,
financial and otherwise, are based on some expressed or implicit
agreements. Honoring these agreements is the key to happy and smooth
relationships among members of a community or society. The Holy
Qur'an therefore stresses this principle again and again. In several
places the Holy Qur'an lists fulfillment of one's commitments among
the most important characteristics of a believer.
"(Believers are those) who are
faithful to their trusts and to their commitments." (23:8) and
"Those who fulfill their commitments when they make them."
(2:177)
In other verses honoring agreements is
given as a commandment:
"O Believers: Honor your contracts"
(5:1)
"And fulfill every commitment.
Surely every commitment will be asked about (on the day of
judgment)." (17:34)
The failure to honor agreements is one
of the primary causes of difficulties in dealings among human
beings. This is true especially of financial dealings. If we analyze
broken business partnerships or other difficulties in dealings of a
financial nature, we will in every case find that these difficulties
resulted from a failure on the part of one or more parties to
fulfill some agreement implicit in those dealings.
There are four possible reasons why any
party may fail to fulfill an agreement: due to failure of memory,
due to differing understandings of the terms of the agreement, due
to bad faith or due to circumstances beyond the control of the party
or parties concerned. The Qur'an and Hadith give guidance aimed at
countering each of these causes of a breech of agreement.
WRITING AND WITNESSING
THE DEAL
To avoid failure of memory and to reduce
the chances of misunderstanding and bad faith, the Qur'an commands
the writing of financial deals and/or having the deal confirmed by
witnesses. The Qur'anic commandment is contained in the following
two verses, the first of which is the longest verse in the Qur'an:
"O You who have attained to faith!
Whenever you give or take credit for a stated term, set it down
in writing. And let a scribe write it down equitably between
you; and no scribe shall refuse to write as God has taught him:
thus shall he write. And let him who contracts the debt dictate;
and let him be conscious of God, his Sustainer, and not weaken
anything of his undertaking. And if he who contracts the debt is
weak of mind or body, or is not able to dictate himself, then
let him who watches over his interests dictate equitably. And
call upon two of your men to act as witnesses; and if two men
are not available, then a man and two women from among such as
are acceptable to you as witnesses, so that if one of them
should make a mistake, the other could remind her. And the
witnesses must not refuse (to give evidence) whenever they are
called upon.
And be not loath to write down every
contractual provision, be it small or great, together with the
time at which it falls due; this is more equitable in the sight
of God, more reliable as evidence, and more likely to prevent
you from having doubts (later). If, however (the
transaction) concerns ready merchandise which you transfer
directly unto one another, you will incur no sin if you do not
write it down.
And have witnesses whenever you
trade with one another, but neither scribe or witness must
suffer harm, for if you do (them harm), behold, it will be
sinful conduct on your part. And remain conscious of God, since
it is God who teaches you (herewith) - and God has full
knowledge of everything." (282)
"And if you are on a journey and
cannot find a scribe, pledges (may be taken) in hand: but if you
trust one another, then let him who is trusted fulfill his
trust, and let him be conscious of God, his Sustainer. And do
not conceal what you have witnessed, for, verily, he who
conceals it is sinful at heart; and God has full knowledge of
all that you do." (283)
In these verses the Qur'an distinguishes
between two types of financial transactions: those that involve
credit for a definite period and those that are carried out on the
spot. Examples of the first type include loans for a definite
period, purchase or sale of goods with either the payment or
delivery of goods promised for some fixed time in the future, while
the examples of the second type include buying something in a shop
on a cash-and-carry basis.
For financial transactions involving
credit, the Qur'an commands the writing of the terms of the
transaction and having the deal confirmed by two male witnesses or
one male and two female witnesses. For on-the-spot transactions, the
writing of the deal is made optional while witnesses are apparently
recommended. These instructions, it should be noted, are delivered
on the assumption that people cannot not read or write. This
assumption is still relevant and is likely to remain forever
relevant. A majority of mankind still cannot read and/or write and
it is likely that there will always be a large minority of such
people. But there is another reason why the Qur'anic instructions
will always remain relevant. As the level of literacy and education
increases in the world so does the complexity of financial dealings,
so that an average person is likely to remain incapable of writing
and concluding every financial deal on his own. Just as in the time
of Qur'anic revelation an average person needed a scribe because he
was unlettered, in the modern times an average person needs a lawyer
or a financial agent because despite being literate he does not know
all that is involved in most modern deals. Similarly the role of
witnesses is now often taken by signatures, thumb impressions,
notaries/lawyers or court officials, although ordinary witnesses are
frequently used.
It might be surprising for some readers
that the Qur'an recommends that even on-the-spot transactions such
as sale of goods on cash-and-carry basis should have some proof in
writing or through witnesses and perhaps because at first sight it
looks unnecessary this Qur'anic recommendation has been almost
completely ignored in practice in the Muslim world. However, as the
business became more organized, the wisdom of the Qur'anic
recommendation has been independently discovered in modern times.
These days, each time we buy any small or large item in a shop, we
are issued a receipt by the seller. This is because as a proof of
sale the receipt serves the following purposes, among others:
a) defective items may
be returned with little or no arguments;
b) if the shopkeeper
overcharged or cheated the buyer in some other way, he may be
brought to justice;
c) shoplifters can be
caught and brought to justice; and
d) both the buyer and
the seller can keep accounts more easily.
We have briefly considered above the
usefulness and relevance of the Qur'anic instructions about writing
and/or witnessing financial deals. Let us now consider the important
question: how obligatory are these instructions?
The writing of deals involving credit
is obligatory, since referring to on-the-spot transactions the
Qur'an says :
"There is no blame on you if you
don't write (the deal)."
which implies that for transactions
involving credit there is blame if we do not write the
details. This conclusion is further supported by a Hadith in which
the Prophet (pbuh) is reported to have said that three types of
people cry out to Allah for help but are not helped. One of these
three types consists of people who lend money to others and do not
get it back because in disobedience to God's commandment they did
not write the details of the loan nor had it witnessed.
The purpose served by witnesses is that
they provide evidence that the terms of the deal were faithfully
written and agreed to by all the parties concerned. Witnesses make
it difficult for any party to later accuse the scribe of not
faithfully writing the terms of the deal or denying agreeing to
those terms. In case both parties can read and write these purposes
will be served by signatures. For small deals therefore signatures
may be considered sufficient. For bigger deals signatures in the
presence of witnesses or a notary would be desirable.
It is clear that a written deal is
meaningless without a proof that it was faithfully written and
acceptable to the parties. Consequently, when writing of a deal is
obligatory, so is providing such a proof in the form of witnesses,
signatures, etc.
For on-the-spot transactions, the Qur'an
does not make writing an obligatory act but says the witnesses
should be present. However, in relaxing the requirement of writing
the Qur'an assumes that it is harder to find a scribe than to find
witnesses, which was the case in Arabia at the time of the Qur'anic
revelation. In our age, it is harder, at each transaction, to
arrange witnesses than to arrange a written proof of sale in the
form of a bona fide receipt, which in any case provides a better
proof than do witnesses. Hence a bona fide receipt fulfils the
objectives behind the Qur'anic recommendation concerning on-the-spot
transactions.
The Qur'an says that one of the two male
witnesses may be replaced by two women witnesses. The reason given
is that "if one (of them) forgets, the other can remind her." Thus
the basis of the rule is that women, being generally less involved
in business matters, may be more prone to forget the details of a
deal. Clearly, if we know that certain women or women in a certain
society or age have the same knowledge and experience in business
matters as the average man, then the rule will not be applicable. It
should be noted here that in another matter in which a woman is
expected to have as much knowledge as a man the Qur'an accepts a
woman's witness at par with that of a man (see 24:6-9).
EVEN SMALL DETAILS TO BE
WRITTEN
The Qur'an says:
"And do not loath to write it down,
be it small or great..."
Here "small or great" probably refers to
the amount of loan, but in the case of complex modern deals we can
use analogy (qiyas) to understand it to mean "small or great
detail". The written deal should be sufficiently detailed so that
chances of doubts or misunderstandings arising later any be
minimized.
AVOIDING BAD FAITH
Writing a clear, detailed agreement,
duly signed and/or witnessed, can avoid two causes of problems in
financial dealings: failure of memory and misunderstanding about the
terms of the agreement. It can also reduce the chances of any of the
parties involved falling victims to the temptation of taking
advantage of the other parties by lying, cheating or other crooked
ways resulting from bad faith. But to avoid bad faith more than just
writing the deal is needed. There is first of all need for taqwa
on which the whole teachings of Islam lay such emphasis. Taqwa
is that respect for moral values which comes through fear and
consciousness of God and belief in the hereafter.
ENFORCING AGREEMENTS
But there will always be some people who
do not give too much importance to taqwa. They will not
hesitate to break an agreement whenever it suits them. For such
people there is also need for a legal apparatus to enforce the deals
they willingly sign.
In Muslim lands there have always been
courts in which disputes among Muslims could be settled. However, in
non-Muslim countries we would have to depend on local non-Muslim
courts until such time as we establish, like, e.g. the Jews, some
community religious courts with some recognized authority to enforce
laws.
During the period of our existence in
Western countries when we have to depend on local courts, we should
take a Muslim brother to court only as a last resort, when there
remains no other way to deal with his devious and crooked ways. |