Islamic Finance

Islamic Finance

Ḥalāl earning, zakāt & ribā

Principles

Ḥalāl earning

Earning a living through lawful means is an obligation; the best earned is from one's own hands. «No one ever eats better food than from what he earns by his own hands.»

Bukhārī

Prohibition of ribā

Allah permitted trade and prohibited interest — ribā is a grave sin that Allah declared war against: «If you do not, then be informed of a war from Allah and His Messenger.»

2:275, 2:279

Fulfilment of contracts

«O you who believe, fulfil all contracts.» Agreements must be honoured, whether written or verbal.

5:1

Avoiding fraud

«Woe to those who give less [than due] — those who, when they take a measure from people, take it in full, but when they give by measure or weight, they give less.»

83:1–3

Justice in trade

Give full measure and weight with justice — do not deprive people of their due. «And do not deprive people of their due, and do not commit abuse on earth, spreading corruption.»

11:85, 26:183

Charity over hoarding

«Do not turn your hand chained to your neck nor spread it fully, lest you become blameworthy and destitute» — balance in spending.

17:29

Halāl earning brings barakah

«The lawful is clear and the unlawful is clear; between them are matters that are doubtful» — guard your wealth by avoiding the doubtful.

Bukhārī & Muslim

Zakāt Rules

Who pays

Every adult Muslim whose wealth exceeds the niṣāb (≈85g of gold) for a full lunar year. Children's wealth is also subject to zakāt, paid by their guardian.

9:103

Rate

2.5% of qualifying savings, trade goods, gold, silver, and cash. Agricultural produce and livestock have separate rates.

Ijmāʿ

Who receives

Eight categories: the poor, needy, zakāt workers, those whose hearts are to be reconciled, slaves (to free them), debtors, in the path of Allah (fī sabīl Allāh), and stranded travelers.

9:60

Niṣāb

Gold: 85g; silver: 595g; cash equivalent of either. Zakāt is due only on wealth held above niṣāb for a full lunar year.

Bukhārī & Muslim

Items subject to zakāt

Gold, silver, cash, trade goods, agricultural produce, livestock (camels, cows, sheep), and discovered treasures (riqāz).

Ijmāʿ

Types of Ribā

Ribā al-nasīʾah

Interest on a loan — extra charged for the time given to repay. The classic form of interest forbidden by the Quran.

2:275–279

Ribā al-faḍl

Exchanging unequal quantities of the same commodity in the same transaction (e.g., gold for gold of unequal weight) — forbidden to prevent the door to ribā.

Muslim

Modern banking interest

Conventional bank interest falls under ribā al-nasīʾah — both paying and receiving it are forbidden, as are writing or witnessing the contract.

Bukhārī

Duʿā

اللَّهُمَّ اكْفِنِي بِحَلَالِكَ عَنْ حَرَامِكَ وَأَغْنِنِي بِفَضْلِكَ عَمَّنْ سِوَاكَ

When settling a debt

O Allah, suffice me with what You have made lawful over what You have made unlawful, and enrich me with Your bounty beyond anyone but You.

Tirmidhī

لَا إِلَهَ إِلَّا اللَّهُ وَحْدَهُ لَا شَرِيكَ لَهُ، لَهُ الْمُلْكُ وَلَهُ الْحَمْدُ، يُحْيِي وَيُمِيتُ وَهُوَ حَيٌّ لَا يَمُوتُ، بِيَدِهِ الْخَيْرُ وَهُوَ عَلَى كُلِّ شَيْءٍ قَدِيرٌ

When entering the marketplace

There is no deity but Allah alone, no partner. His is dominion and praise; He gives life and death, He is the Living who never dies; in His hand is good, and He has power over all things.

Tirmidhī, Ibn Mājah

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