Voices of Islam (169 page)

and is assessed in most cases as a 2.5 percent tax on such wealth.

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The Zakat tax must be paid every year, even if it means selling assets to free cash for the payment of Zakat. However, this wealth tax is not meant to burden those in severe financial difficulty and who may be unable to afford a home or cannot sustain themselves and their families. The practice of Zakat has a number of complicated rules for those who are actively engaged in commerce or agriculture. These rules are the subject of substantial treatises and allow for business and agricultural managers to make specifi decisions that may increase or decrease the amount of Zakat that is due. For instance, the Zakat on a herd of animals is different from that on a crop, which must be stored for signifi nt periods. Also, the Zakat on inventory held for sale is different from that on equipment that is leased or supplies used in the ordinary course of business operations.

A rather intriguing phenomenon is the behavior of individuals residing in countries where Zakat is formally collected by the state. These persons may seek to reduce as much as possible the amount to be collected by the state for diverse reasons. They may fear that the state will not spend Zakat funds in a Qur’anically mandated manner. Or, they may prefer to direct their Zakat payments to a charity chosen by them. As with tax management strategies in a nonreligious environment, there is no Islamic restriction on structuring one’s business to minimize one’s taxes within the law. However, the same Muslim businesspeople who try to reduce their Zakat payments are often substantial donors to charities. The reduction of the Zakat obligation does not reduce their desire to help others in need. Therefore, they may engage in additional, nonmandatory acts of charity (
Sadaqa
). This term is derived from an Arabic root word meaning ‘‘truth- ful’’ or ‘‘righteous.’’ The Qur’an encourages
Sadaqa,
whether given openly or secretly, as an important, self-imposed obligation for those who have succeeded in commerce.

Sadly, one of the results of the horrific attacks of September 11 has been the so-called War on Terror in which charitable contributions made by Muslims are called into question by various Western governments. The abuse of some charities by supporters of terrorism has tainted one of the most profound religious obligations in Islam. Two trends have evolved in response to these allegations, one of which is not to anyone’s benefit. Many donors now feel it necessary to give their charity secretly and in cash, making it more easy for criminals to abuse the Zakat and
Sadaqa
obligations. A second response has developed whereby major Muslim busi- nesspeople, Islamic charities, and governments have partnered to assure that transparent and auditable donations are made legitimately to lawful charities serving the needy. This latter approach is increasingly recognized by Muslim businesspeople as the only way to both fulfill their obligations to help the needy and assure that the architects of the War on Terror do not find a way to make it into a War on Islam.

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ETHICAL INVESTMENT IN ISLAM AND THE WEST

Many of the limitations on investment that Muslim businesspeople em- brace are similar to approaches that are becoming common in many Western markets and in some developing economies. These are the ethical business, fi ance, and investing movements, which are gaining popularity around the world. As a result, it should not be surprising that Islamic and Western ethical approaches to investment have strong parallels. The Shari‘a sets specifi standards for commercial interaction and the avoidance of sinful behavior. Whether or not Muslims have fully lived up to Qur’anic standards, the ethical component of business life is seen as increasingly important. Rodney Wilson, a leading analyst of global investment trends, has compared the charters of Islamic banks and ethically focused conven- tional banks and has found a convergence between the two.
12
However, there are differences between the Islamic and ethical business movements. For example, the concern not to overinnovate when applying Islamic law and the focus on correct contractual form have kept Muslims from under- standing the spirit of ethical fi ce. Many Muslims are concerned about the methods of transacting such investments, the sources of their funds, and the quality of juristic opinions about these matters. Beyond Zakat and voluntary charity, the medieval Islamic concept of the charitable foundation or endowment (
waqf
) has yet to be adapted to modern condi- tions in the Islamic fi movement. Although Jordan and Bangladesh have explored innovative means to fund and expand such endowments, this subsegment of financial activity remains underdeveloped in modern Muslim societies.

One of the great achievements to take place in ethical investing in a Muslim country is the refi t of micro-fi e by the Grameen Bank of Bangladesh. This has been a curious development because Grameen’s value orientation is more in line with classical capitalism, although it has been adapted to local social values. In recent years, a more authentically Islamic alternative was developed by Islami Bank Bangladesh and is now widely emulated by many Muslim institutions in Africa, Asia, and the Middle East. The differences between the Grameen Bank and Islami Bank models refl the desire of Muslims to operate in an interest-free environment and to offer services in a manner that is in accord with more traditional Islamic family values, such as empowering the male head of a household to exercise his finan- cial responsibilities as implied in the Qur’an. This approach imposes upon the male head of household the obligation to provide for younger family members, mothers, sisters, and others who are deemed to require care and protection. In the Shari‘a, this seemingly paternalistic approach grants the so-called weaker members of a household a legal claim on the ‘‘stronger’’ member. However, even under Islamic law, women who are financially

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independent or who have resources suffi ient for investment are allowed to invest their resources as they wish.

SOURCES OF COMMERCIAL LAW IN ISLAM

The nature of rights and obligations in the Qur’an and the Shari‘a is based upon the capacity of different parties to fulfi their obligations or properly claim their rights. In many cases, the Shari‘a must take into account different circumstances and conditions. Commerce finds three spheres of application of the Shari‘a: (1) ethical and moral guidance for the businessperson,

(2) resolution of disputes, (3) rules and regulations that govern money. Qur’anic verses that make precise injunctions and offer specific guidance are called
ayat al-ahkam,
‘‘verses of legal rulings.’’ With regard to commerce, three fundamental injunctions are established by the
ayat al-ahkam:

1. the prohibition of
   riba,
   (2) the prohibition of inappropriate consumption of wealth, and (3) the requirement of written contracts.
   13
   

   Since much Qur’anic legislation on commerce is of a general nature, Muslims also turn to the authentic sayings and reports of the Prophet Muhammad. Collectively, these traditions are termed the Sunna. The source for this term is a hadith of the Prophet that says, ‘‘Follow my Sunna
   ...
   and that of the rightly guided caliphs who will succeed me. Hold onto it firmly and guard yourself against innovation, for every innovation is mischief.’’
   14
   The early Muslims qualifi the reliability of the Hadith through a process of critical inquiry:
   

   Since the
   hadith
   was passed verbally from one generation to another, the science of
   rijal
   was developed for the critical examination of the life-histories and the trustworthiness of the hadith transmitters. The narrator of a hadith, for instance, ought to state his source. If the source was not an original companion of the Prophet, the narrator had to state the secondary source from which he received the hadith. Each hadith, therefore, had to be prefixed by a chain of narrators of authorities,
   sanad,
   that went back to the original narrator. This process was called
   isnad
   (unbroken chain of transmission).
   

   The method of criticism which the scholars of hadith followed helped them in discovering the degree of accuracy of a particular transmitter of a particular hadith. Jurisprudentially speaking, there are many restrictions for considering a hadith suitable to furnish the ground for a legal precept. Jurists categorized Sunna into two major categories:
   maqbul
   (accepted) and
   mardud
   (rejected). The accepted Sunna is divided into two groups:
   sahih
   (authentic) and
   hasan
   (agreeable). The vast majority of jurists regard the first category as the only valid part of the
   Sunna
   for serving legitimate grounds for law.
   15
   

   Although some scholars believe that the Hadith are subject to controversy, the rigor of Hadith analysis has meant that the core body of the Sunna has been free from controversy since the ninth century of the Common Era. Although matters of worship are highly detailed within the Sunna, matters
   

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   of commerce are less detailed. Of less weight than the Hadith are the
   athar,
   the sayings of the Companions and immediate generations following the Prophet, may peace be upon him. Accepted
   athar
   are seen as supplementary traditions that illuminate the Hadith and provide evidence of practices that were observed or tolerated during the Prophet Muhammad’s lifetime.
   

   According to Dr. El-Sheikh, Islamic jurisprudence (
   fiqh
   ) is the exercise of intelligence to solve practical problems in the absence of a specific command from the Qur’an or the Sunna. The practice of
   fiqh
   requires intelligence and independent judgment.
   16
   Whereas the Qur’an and the Sunna are the primary sources of law, Islamic tradition embraces other forms of legislation and prac- tical guidance as well. However, this exercise of human discretion is limited. According to the noted Islamic scholar Seyyed Hossein Nasr, ‘‘Divine law is an objective transcendent reality, by which man and his actions are judged, not vice versa
   ...
   . To attempt to shape the Divine law to the ‘times’ is, there- fore, no less than spiritual suicide because it removes the very criteria by which the real value of human life and action can be objectively judged and thus surrenders man to the most infernal impulses of his lower nature.’’
   17
   

   However, in practical terms, says Dr. Fathi Osman, ‘‘Legal rules in the Qur’an and Sunna are limited in number, although they cover extensive areas of life. Many of these rules offer general principles and guidelines. Justice is ordained for essentially all human activities: in family, in business, in the whole society, between rulers and the ruled, and in all universal relations in general. In the field of transactions, for example, the Qur’an and Sunna emphasize the essential requirements for mutual consent for any contract and the prohibition of exploitation, fraud and usury.’’
   18
   

   Most historians of Islamic law state that
   ijma‘,
   the consensus of the jurists, is the third source of legislation in Islam. In reality, however, the proper term is
   ijtihad,
   literally, the ‘‘struggle’’ to apply the law in specific cases. One may consider
   ijtihad
   to be the third source of legislation because it is the result of either individual scholarly effort or collective scholarly and juristic analysis.
   19
   This latter, collective form of
   ijtihad
   is
   ijma‘.
   The areas in which
   ijtihad
   operates include analogical reasoning (
   qiyas
   ), juridical preference (
   istihsan
   ), public welfare (
   istislah
   ), and custom (
   ‘urf
   ).
   20
   The purpose of
   ijtihad
   is to make life easier within the bounds of the permissible (the concept of
   taysir
   discussed above), to protect the public interest, to eliminate hardship (the concept of
   raf’ al-haraj
   discussed above), and to address the issue of necessity in the context of meeting the objectives of the Shari‘a.
   21
   

   Certain forms of contract are not in general agreement with the accepted principles of contract in the Shari‘a. However, it is through juristic prefer- ence, giving way over time to consensus, that such contracts are permitted.
   22
   For instance, some Muslim jurists worry about the lack of commercial trust among obligors and allow the assessment and collection of penalty interest so long as it is given to charity. This modern issue reflects a unique intersec- tion between the Qur’anic ban on interest and the fear that Muslims do not
   

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   currently live up to the standards of morality mandated by the Qur’an and the Sunna. Since the amount paid as a penalty may not be taken as a profit, modern jurists who exercise their juridical preference in this matter oblige the recipients of penalty interest to donate these funds on behalf of the defaulting borrower to a charity of the borrower’s choice. Other scholars are not comfortable with this approach, but they have not voiced outrage or deep opposition to this practice because they fi that there may be an overriding public benefit (
   istislah
   ) to it.
   

   Customary usage (
   ‘urf
   ) is also accepted as a basis for rulings and judgments, provided it does not contravene or contradict Islamic values and principles.
   23
   For instance, when we examine Islamic mortgage alternatives, we learn that one provider has secured a ruling allowing a shareholder to pay real estate taxes on the property, even though she is not the primary or majority owner of the property. This is consistent with local usage and is justifi d in that the real estate taxes inure almost exclusively to the benefi of the consumer. The systematic study of modern commercial legislation in the West and its applicability to the objectives of Islamic law have begun only recently. This fact was pointed out by Yusuf DeLorenzo in a paper delivered before the International Islamic Financial Standards Board: ‘‘In the classical system, custom (
   ‘urf
   ) played an important role. The legal maxim that ‘all transactions are to be considered lawful as long as they include nothing that is prohibited’ went hand in hand with custom and mercantile practice in clearing the way for innovation in trade and commerce. However, when the Shariah boards of the modern Islamic banks began their work in the 70’s, there was no signifi nt Shariah-compliant trade taking place, and thus no customary practice in regard to it.’’
   24
   In matters of
   ijtihad,
   once the collectiv- ity of Muslim scholars (
   ulama
   ) have formed a consensus about the soundness of an interpretation on a point of law, the differing opinions of one or a few scholars are not sufficient to overturn or invalidate the consensus.
   

   Inductive reasoning by analogy (
   qiyas
   ) is not popular with some modern Muslims as a means of determining legal precepts.
   25
   However, an authentic hadith of the Prophet Muhammad reports the verbal instructions of the Prophet to Mu‘adh ibn Jabal when he was appointed as governor of Yemen. The Prophet asked how he would determine affairs. Mu‘adh replied that he would first turn to the Book of God; if he could not fi the answer there, he would apply the Sunna of the Prophet; and if he could not find an answer there, then he said, ‘‘I shall decide according to my own opinion.’’ The Prophet was pleased with his answer, for it meant that Mu‘adh’s opinion would be an informed one. Mu‘adh’s appointment was confirmed and with it the acceptance of reasoning (
   qiyas
   ) as a means of legislating practical matters in Islam.
   26
   As DeLorenzo summarizes: ‘‘It is the nature of Islamic jurisprudence itself to insist on the freedom of qualified jurists to formulate and hold their own opinions. In fact, the inner dynamic for renewal known as
   ijtihad
   ensures the relevance of Islamic law to changing circumstances by
   

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   empowering jurists to constantly revisit points of law and to improve upon them when and where necessary.’’
   27
   

   Ijtihad
   is the most flexible interpretive tool that Muslims can apply in their continuous reinterpretation of authentic scriptural texts.
   28
   However, the flexibility available to Muslims in commerce means that they should not lean too heavily upon
   ijtihad
   as a tool to seek rulings that help them achieve goals that push the outer limits of what the Shari‘a permits. Especially since determinations made under this approach are susceptible to modification or replacement by a future interpretation.
   29
   

   Consensus (
   ijma‘
   ) is as much an outcome as a source of juristic principle. Once the community of jurists are in broad agreement about the
   ijtihad
   of one or more of their members—the
   qiyas
   of a qualifi scholar, the public benefit that comes from an action or application of a rule, or the validity of a custom—then their common commitment to such a decision constitutes
   ijma‘.
   However, one must be cautioned that many times, Muslims have con- fused
   ijma‘
   with their local customs, which may or may not have a basis in the core sources of Shari‘a. Such customs may even introduce innovations that are contrary to precepts enshrined in the primary sources of the Shari‘a.
   30
   Ijma‘,
   as practiced by qualified jurists, has been a fundamental tool of Islamic jurisprudence and points toward the necessity of consultation (
   shura
   ) among scholars, jurists, various experts, and the people as a whole. In commerce, the challenge for Muslims is to understand that such tools are meant to facilitate compliance with the Shari‘a as opposed to circumventing it.
   

   Collectively, the methods of ‘‘law-finding’’ discussed above are referred to as
   usul al-fiqh,
   the roots of Islamic jurisprudence.
   31
   They provide the meth- ods whereby Muslims derive guidance for everyday life, including commerce, in accordance with the Qur’an and the Sunna. Historically, the approach of Muslim scholars has been to avoid codification of the results of
   ijtihad.
   For this reason, the evolution of
   fi h
   interpretations has closely paralleled the Anglo-American tradition of Common Law in the building of judicial consensus upon the interpretive endeavors of individual judges.
   32
   

   For ordinary Muslim, a simple understanding of
   fiqh
   allows the individual to distinguish among fi categories of activity: obligatory, recommended, permitted, discouraged, or forbidden. Neither commerce nor fi nce is an obligatory action (
   fard
   or
   wajib
   ). However, every Muslim looks upon the example of the Prophet Muhammad, may peace be upon him, and his beloved wife Khadija as inspirations to engage in commerce. Muhammad was a merchant who was so honest that he earned the honorifi
   al-Amin,
   ‘‘The Trustworthy One.’’ When Khadija, a local businesswoman, employed him, he so impressed her with his integrity that she proposed marriage to him. This example from the Prophet’s early life teaches Muslims that honest and decent commerce is
   mandub,
   an act which is recommended but not required of the faithful. Taking the Prophet as their inspiration, Muslims traveled the world for commerce.
   

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   In East Asia and the far reaches of Africa, Islam spread with the positive impression made by Muslim merchants. As often as not, the honesty that was a trademark of the Prophet was the calling card of Muslim merchants. On the one hand, the unique class of faith-driven merchants would typically devote themselves to the kinds of commerce that were considered
   mubah
   in Islamic law: acts about which the Shari‘a is neutral. Such acts make up the preponderance of commercial behavior. In other words, most goods and business practices that one may find in the market do not violate the rules that guide Muslims. On the other hand, those same Muslim merchants would have likely avoided activities considered
   makruh
   —behavior that is discouraged for the believers, but not explicitly forbidden. When it comes to the
   makruh,
   this might mean avoiding things that may lead to forbidden behavior or commerce. For instance, if a merchant brokers barley in the food industry, this is permissible behavior. But, what if the merchant has good reason to believe that his buyer would sell the grain to a brewery? The trade would not be forbidden, without proof or evidence that the purpose of purchasing barley would be to brew beer. But, it would certainly be discouraged.