“And fulfill the covenant of Allah when you have taken it, [O believers], and do not break oaths after their confirmation while you have made Allah, over you, a witness. Indeed, Allah knows what you do.” [Qur’an 16:91]
Let us always strive to fulfil our covenants, agreements and promises, big or small. Know that in our dealings with others, Al-Kafeel is our witness and let us be both comforted and alerted by the fact that He will protect the interests of everyone in each situation.
Wasiat is a declaration of a person made during his lifetime in respect to his assets or benefit thereof, to be carried out for the purpose of charity or for other purposes permissible by Islamic law, after his death. Prophet Muhammad (PBUH) is reported to have highly encouraged the writing of Wasiat when leaving property for heirs:
“It is not permissible for any Muslim who has something to Wasiat to stay for 2 nights without having his Wasiat written and kept ready with him”. (Sahih Al-Bukhari, Vol. 4, Book 51, Number 1)
For a better understanding of the topic, do look for resources regarding the Muslim Intestate Law, which is provided for under the Administration of Muslim Law Act (AMLA) and is administered by the Syariah Court in Singapore.
Riba’ is a concept in Islam that refers broadly to the concept of growth, increasing or exceeding; roughly translated as illegal, exploitative gains made in business or trade. In more specific terms, it refers to charged interest or usury. According to most Islamic jurists, riba’ also refers to the simultaneous exchange of goods of unequal quantities or qualities.
“...Allah has permitted trade and has forbidden riba’.” [Qur’an 2:275]
It is forbidden under Islamic Law because it is considered to be exploitative and brings about great harm to humanity. Though Muslims agree that riba’ is prohibited, there is much debate over what constitutes riba’. May Allah grant us a deeper understanding on the subject keep us away from Riba’ and its harms.
Ta’widh refers to late payment compensation imposed by a bank/lender on a defaulting customer who fails to meet his/her obligation to repay the agreed-on amount. This would be considered as a form of riba’ and would be impermissible unless it meets the following conditions:
-Amount of Ta’widh is not greater than the actual loss suffered by the bank/lender.
-The default in, and default of, payment is due to the other party’s negligence.
-The compensation shall be determined by a third party (eg. a regulator) rather than the bank/lender.
Wakaf, according to the Shari’ah, is an ongoing charity; a voluntary charitable endowment from one’s personal belongings or wealth in the form of cash / property for shari’ah compliant causes.
Once dedicated as a Wakaf, the asset’s ownership has been transferred to Allah SWT, allowing a perpetual use for charity. In Singapore, all wakaf lands and properties fall under the care and management of MUIS.
Prophet Muhammad (PBUH) said, “ When the son of Adam dies, his actions come to an end except for three; sadaqah jariyah (ongoing charity), knowledge which brought benefit and a pious child who makes supplication for him.”
Narrated by Abu Hurairah (May Allah be pleased with him) - (Muslim)
The Arabic term “Gharar” is associated with uncertainty, deception and risk. It is a significant Islamic Finance concept and is used to measure the legitimacy of a hazardous sale or risky investment.
Transactions and contracts are considered as gharar, when excessive risk or uncertainty is combined with one party taking advantage of the property of the other, or one party only benefiting by the other party's loss. Gharar is generally prohibited in Islam, and there are clear rules against such transactions.
The Prophet (PBUH) has forbidden the purchase of the unborn animal in its mother’s womb, the sale of the milk in the udder without measurement, the purchase of spoils of war prior to their distribution, the purchase of charities prior to their receipt, and the purchase of the catch of a diver.
Narrated in Ahmad and Ibn Majah on the authority of Abu-Said AlKhudriy
Shariah Compliant Bonds
A sukuk is commonly referred to as a “Shariah-compliant” bond. Since the traditional Western interest-paying bond structure is not permissible, the issuer of a sukuk sells an investor group a certificate, and then uses the proceeds to purchase an asset, of which the investor group has partial ownership. The issuer must also make a contractual promise to buy back the bond at a future date at par value.
Sukuks were created in order to link the returns and cash flows of debt financing to a specific asset being purchased, effectively distributing the benefits of that asset. In this way, investors are able to comply with the Shariah and still receive the benefits of debt financing. However, financing can only be raised for identifiable assets due to the structure of sukuks.
An investor therefore does not own a debt obligation owed by the bond issuer, but instead owns a piece of the asset that's linked to the investment. This means that unlike bond holders, sukuk holders receive a portion of the earnings generated by the associated asset.
Takaful is a type of insurance that is in accordance with Islamic religious law. Under this scheme, members contribute money into a pool system to guarantee each other against loss or damage; sharing the responsibility of cooperating with and protecting one another. Takaful policies cover health, life, and general insurance needs.
Any claims made by participants are paid out of the takaful fund and any remaining surpluses, after making provisions for the likely cost of future claims and other reserves, belong to the participants in the fund - not the Takaful Operator (TO). Those funds may be distributed to the participants as cash dividends or distributions, or via a reduction in future contributions.
Takaful insurance companies were introduced as an alternative to those in the commercial insurance industry, which go against Islamic restrictions on Riba, (interest), al-Maysir (gambling), and al-Gharar (uncertainty) principles.
Zakat is the 3rd pillar of Islam and is the determined share of wealth prescribed by Allah S.W.T. to be distributed to the 8 categories entitled to receive it. It is an act of worship in terms of wealth and also a symbol of Islamic social justice; it cleanses one's soul, purifies and grows his/her wealth while eradicating poverty. There are two types of Zakat, namely Zakat Fitrah and Zakat on wealth.
Zakat Fitrah is to be paid in the month of Ramadhan before the Eid prayers. Zakat on wealth, on the other hand, can be paid anytime during the year, once the Haul (possession of assets for one Hijrah year or 355 days) and Nisab (the market value of 86 grams of gold) are reached; a specific rate of 2.5% will then be applied.
Some of the significances of Zakat include developing an individual's gratitude for Allah’s bounty, providing a religiously-approved method of managing the society’s economy and finance, and also making it possible for part of the wealth of the rich to be distributed among the poor.
“Indeed, those who believe and do righteous deeds and establish prayer and give Zakat will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve.” - Surah Al-Baqarah: 277
For more information and assistance regarding Zakat in Singapore, please log on to MUIS website or head down to your local mosque.