Use of Islamic Sharia Law in Commercial Transactions

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Islamic Sharia Law in commercial transactions involves several prohibitions such as those of riba and gharar. Muslim scholars have agreed that the damages caused by dealing with usury and gharar outweigh their benefits; they are forbidden in the Quran and Sunna. However, this prohibition does not necessarily mean that all contracts which contain gharar are invalid; for example, sallam contracts contain gharar. The reason for this is that the benefits have overshadowed the harms. Therefore, the objective of this essay is to analyse Islamic rules in the prohibition of both usury and gharar in an attempt to demonstrate that, although they are prohibited because their harms outweigh their benefits, in some contracts gharar is allowed. Thus, this reflects the flexibility of Islamic law and how it is able to be modified to adapt to the rapid economic development. Riba It is unanimously agreed that riba means increase or growth (chapter 2). This kind of increase is divided into two types: the first is an increase in money from the money itself. This occurs when the owner of the money raises the rate of the debtor’s debt due to a delay in payment (REFRENC). This type is called riba al-naseia or riba alQuran. This type has many verses which confirm its prohibition, not only in Islam but also in Judaism (chapter 2, p. 36). ‘Because of the wrongdoings of the Jews we forbade them good things which were before made lawful unto them, and because of their much hindering from Allah’s way. And of their taking usury when they were forbidden it, and of their devouring people’s wealth by false pretences. We have prepared for those of them who disbelieve a painful doom’ (4:160-161) This verse is from the fourth chapter, al Nisa. The second type ... ... middle of paper ... ...efits, and in this case will not be forbidden (Al-Gamal, ????). To clarify this point a sallam contract may be a clear example of a contract which, although it contains gharar, it is permissible. In light of this situation it is clear that Islam has the flexibility in legislation and takes into account the needs of the individual as well as society. Conclusion Based on the concept of usury and gharar under the wisdom of the prohibition of usury and gharar can say that is forbidden in the Islamic concept requires that the damages should exceed the interest and usury, reflects this clearly. Gharar illustrates the flexibility of Islamic law in terms of it being permissible when its benefits outweigh the harms. Through these findings we see a question emerge that deserves to be the focus of a discussion: are all contracts in Islamic banks completely free of usury?

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