Wednesday, October 22, 2008
In a very short period of time, the world trade markets and the “economic boom” took a toll for the worse and plummeted to its all-time low. Those who are unaware of the workings of Western Capitalistic Economy continue to turn a blind eye and regard this crisis as a mere short term recoverable mini recession. At the same time, those who have spent their lives in the field are much more critical. In fact, the Global Crisis is neither a trifling matter restricted to a number of days nor is it recoverable.
For a brief analysis of this crisis, it will suffice to merely highlight its origins. In crude words, this crisis is analogous to a terminally ill patient, that is beginning to show fatal symptoms. More than half a century ago in 1938, the Federal National Mortgage Association (Fannie Mae) was formed. This Association lent out loans for the clients looking for home financing. This was the initial infiltration of the reproductive virus, which would one day grow like cancer to bring about the major crisis causing a staggering 2000 point drop in the Market indexes.
The next step was to consolidate the first phase through the formation of The Federal Home Loan Mortgage Company (Freddie Mac) by Richard Nixon in 1970. Freddie Mac began offering a federal guarantee in lieu of the mortgages given by the local lenders. In order for the newly developing market of home mortgages to flourish Freddie Mac laid the foundation of extending financing to those less stable clients who were more likely to default, since the guarantee from the Freddie Mac would secure that risk.
In 1994 Bill Clinton ratified the “Racial Discrimination Treaty” which made low income individuals eligible for taking home loans. Similarly, it encouraged maximizing loans with these financing mortgages to its brink; thus giving a boom to the Home Building and Real Estate sectors, while outwardly providing an equitable housing for all classes.
Simultaneously, while these government interventions gave a boom to respected sectors, they also paved a smooth highway to saturation in the market as well. Once the market saturation was achieved by 2005, the home prices began to drop. Over the last couple of years, this saturation in the home building sector coupled with oscillating interest rates caused many of the clients, who had only received these loans on a Sub-Prime basis, to default on their payments. As the prices started to decline, investors panicked and started pulling their investments out of the market. In some incidents people pulled out as much as £1bn fearing that they will not get to see their savings again. The more money was withdrawn; the worse the market prospect became, motivating even more investors to pull out. Suddenly, we have a whole market being pulled into a whirlpool and taking all the other market sectors along with it.
The hardest blow in such time was to the investment-only banks. The Sub-prime market sells these loans to other banks throughout the globe. The plummeting of the Sub-Prime caused a major ripple on the other banks. The smaller banks became incapable of delivering funds to its investors, throwing them into an abyss of liquidation. In order to recover, these smaller banks looked for help from other banks trying to take loans. However in the midst of “evaporation” of liquidity, banks chose to refrain from inter-bank lending. This is referred to as the “credit-crunch” i.e. when the banks choose not to lend in between themselves to secure their own positions. This caused a recession for those smaller banks, causing some of them to either be nationalized or seek help from governments. At this point, governments decided to intervene once more and inject more money into the system to recover the markets and to assure the people of their savings.
These bail-out plans from the US and UK Governments have so far been unsuccessful in reviving this patient from the clutches and pangs of fatality. And how could they be successful when the gap which they themselves have created over the years between the actual credit and the monetary liquidity is so great that it cannot simply be covered. Moreover, Inflation has increased this gap multifold.
One thing which we understand from the above snippet into the history of the Financial Market is that while we tend to yearn for ownership of any commodity in the world, in the forms of housing, conveyance or earning from securities and futures, we tend to overlook the harms of our greed and the consequences thereof. The banks kept lending and lending in hope to grow the market clientele while reaping the interest of those loans. However, there was simply no cash to cover for those loans. On the other hand, the banks didn’t have cash to give off to the investors.
A closer look at this fiasco reveals that even this Sub-Prime Market is but one factor that has crippled the US economy. The primary and most damaging factor within these Financial Products in particular and the economy as a whole, is the “Riba-virus” (interest) which floats through the bloodstream of the entire system forming the basis for the whole economy. The mortgages which became a plague for the economy are fueled by this Riba. All the misfortune of our economy is borne from this one factor. The core concept of making money from nothing by merely lending credits which are not yet in the system makes the whole Economy hollow from inside, and when the need is most, there is not enough money to cover these gaps. This is the destructive face of Riba. We ought to have realized this ages ago since Allah Ta’ala instituted prohibition of this Riba to rid us from the harms of it. Allah Ta’ala says:
يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافًا مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ
O ye who believe! Devour not usury, doubling and quadrupling (the sum lent).
Observe your duty to Allah, that ye may be successful. (Qur’an 3:130)
In reaction to the prohibition, people sought to defend their stance by claiming that Riba is nothing but a form of trade, just as Western Capitalism believes. There is hardly any sector that does not deal in interest-based products. Capitalism has even made the learned ones believe that such trade in securities and interest markets is nothing but a means of earning and living. Whereas, Allah Ta’ala declared for us,
الَّذِينَ يَأْكُلُونَ الرِّبَا لاَ يَقُومُونَ إِلاَّ كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُواْ إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا…
Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch.That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury… (Qur’an 2:275)
Similar severe admonition of Riba is reported from Prophet of Allah salallahu alayhi wasallam.
وعن عبد الله يعني ابن مسعود رضي الله عنه عن النبي صلى الله عليه و سلم قال الربا ثلاث وسبعون بابا أيسرها مثل أن ينكح الرجل أمه
رواه الحاكم وقال صحيح على شرط البخاري ومسلم ورواه البيهقي من طريق الحاكم ثم قال هذا إسناد صحيح والمتن
On the authority of Abdullah Ibn Mas’ood radiyallahu anhu it is reported that the Rasulullah salallahu alayhi wasallam said, “Usury has seventy three categories. The least category of them is like a man marrying his mother.” (Al-Hakim, Bayhaqi)
Imagine the disgust our beloved Rasulullah salallahu alayhi wasallam had for Riba. Similarly more severe words have been used while admonishing this evil.
وعن جابر بن عبد الله رضي الله عنهما قال لعن رسول الله صلى الله عليه و سلم آكل الربا ومؤكله وكاتبه وشاهديه وقال هم سواء (رواه مسلم وغيره)
On the authority of Jabir bin Abdillah radiyallahu anhuma it is reported that he said: “The Messenger of Allah sallallahu alaihe wasallm cursed the devourer of usury, its giver, its scribe and one who (stands) witness to it”. And he said “they are all same”.(Sahih Muslim)
We do not need more examples to be manifested from side of Allah before we realize that it is only in the obedience of Allah and injunctions of Islam, that we shall enjoy the bliss of a stable and equitable Economy. In defying this commandment of Allah we take up arms to challenge Him. In fact, one who engages in this vile evil has been sought by Allah Himself as an opponent in a War with Him. Allah says,
يَا أَيُّهَا الَّذِينَ آمَنُواْ اتَّقُواْ اللّهَ وَذَرُواْ مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَo
فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مِّنَ اللّهِ وَرَسُولِهِ وَإِن تُبْتُمْ فَلَكُمْ رُؤُوسُ أَمْوَالِكُمْ لاَ تَظْلِمُونَ وَلاَ تُظْلَمُونَ
O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) believers. And if ye do not, then be warned of war (against you) from Allah and His messenger. And if ye repent, then ye have your principle (without interest). Wrong not, and ye shall not be wronged.(Qur’an 2:278-9)
We must shed this element of “interest” from all facets of our life and look towards Islamic Principles to combat the current Global Crisis and dawn into an era of a morally sound Economy.
Abuhajira bin Abdul Hamid
4th Year Student at Madrassah In’aamiyyah
Checked and Approved by,
Mufti Ebrahim Desai
Darul Iftaa, Camperdown
Saturday, August 23, 2008
Someone asked me this question. This person has a few thousand dollars and he wants to make this money multiply in a halal manner. Recently, he heard that the price of gold is going to go up many folds so he wants to know if he could purchase gold with the savings he has right now so that he could sell the gold bars when the price goes up. I found it very hard to answer this question because I dont know whether this is halal.
So, maulana saab is this halal?
In the name of Allah, Most Gracious, Most Merciful Assalaamu `alaykum waRahmatullahi Wabarakatuh The transaction will be permissible as you have stated in your query that the brother will purchase the gold in cash with his savings. As for the issue of selling the gold, it will only be permissible after the buyer first takes physical possession of the gold.
And Allah knows best
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In'aamiyyah
A person is selling a piece of land. He takes a potential buyer to see the land. However, due to there not being any proper roads to access the land, they are unable to reach the actual plot. However, he roughly points out to the buyer the location of the land. The buyer says he has taken it and even receives the title deeds and makes half the payment. Thereafter, when the buyer actually goes to physically see the piece of land, it turns out that it is in a completely different area from the area which he was initially made to believe. He goes back to the seller and asks for his money which he had paid and says he does not want the land because it is in an area which he was not aware of. Is it permissible for the buyer to rescind his decision to buy the piece of land without the consent of the seller?
In the name of Allah, Most Gracious, Most Merciful Assalaamu `alaykum waRahmatullahi Wabarakatuh If a person had purchased a piece of land and was shown roughly the plot from a distance, then he will have the option of returning it upon seeing the actual plot. The option of returning the purchased item after seeing (خيار الرؤية) will not be lost by the transfer of title. If the purchaser does not accept the deal after seeing the plot, then Islamically the seller will have to return his money and deal will be nullified. The seller’s consent to nullify the deal is not a requisite.
Ml. Ehzaz Ajmeri,
Student Darul Iftaa, Madrassah Inaamiyah
I would like to know whether it is permissible to use solar power as a source of heating water and generating electricity in out homes, in light of the environmental issues surrounding the increase in power demand around the world and the implications this has on global warming. I am a scientist and a keen environmentalist, and therefore understand the harms that increase power demand will have the planet. I was told that water heated from the sun is not permissible.Harvesting solar energy has the potential of providing electricity for our homes without the burning of coal and release of toxic fumes and unneccessary carbon deposition into the atmosphere.
In the name of Allah, Most Gracious, Most Merciful Assalaamu `alaykum waRahmatullahi Wabarakatoh It is permissible to use solar power as a source of heating water and generating electricity.
The books of Fiqh do mention that it is makrooh (tanzihi) to use water that is heated by the sun if:
1. It is in a hot country
2. Its on a hot day
3. In a utensil other than gold and silver
4. The water is used while heating This is due to medical reasons that it leads to leprosy. If these conditions are is not found, it will not be makrooh.
Ahsan al-Fatawa (2/43)
H.M. SaeedRad al-Muhtar (1:180) H.M. Saeed
And Allah Knows Best
Ml. Ehzaz Ajmeri
Student Darul Iftaa,
In referrence to your Fatwa 15777 i am confused. Are you saying that solar power is permissible only in the conditions stated or are your saying that it is not permissible in those conditions. Condition 1 states if it is in a Hot country, please explain what this means. Hot to whoCondition 2 Again hot to who?
In the name of Allah, Most Gracious, Most Merciful Assalaamu `alaykum waRahmatullahi Wabarakatoh It is makrooh tanzeehi to use water for wudhu or ghusl if ALL of the conditions are found. If one of the conditions is not found, then it will not be makrooh tanzeehi.As mentioned before, this is due to medical reasons. Therefore, in classifying a country as hot or a day as hot the view of the professionals in that field will be taken into consideration, as they would know best when water heated directly by the sun becomes harmful.Again, this karahah (disliking) is when the water is put directly in the sun and heated. Solar-powered water heaters in today’s time are not operated in this manner, therefore it will not be makrooh.We request if you can please provide us with scientific research on this matter as requested in the previous reply.And
Allah knows best
Ml. Ehzaz Ajmeri