Trade and Commerce

Multi Level Marketing

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Q: Kindly advise me regarding multi level marketing - is it jaaiz (permissible)? I sell herbalife products and part of the business entails signing members up train them to sell, teaching them about the products, etc as well as duplicating this behaviour to form a team. I do benefit from my team members sales. At the same time it involves work from my side on a supervisory level. In some cases orders are done online and I am not involved directly in the transaction but I still benefit from my team members. Is this income halaal?

A
: Your query on multi level marketing refers. This is permissible and the income earned is halaal. You are being remunerated for training and supervising people, while the benefist you receive from the sales of team members will fall under a partnership deal that is lawful in Shariah.

Feel free to ask if the are still any queries related to this

Allah Ta’ala knows best

Mufti Siraj Desai

Car on Fixed Lease Agreement

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Q: Mercedes Benz has the agility finance option which means that you lease a car from them for a certain amount of time. Terms and conditions apply. Offer calculated on a C180. At a rate of 8.68% linked over 36 months, deposit of 10.5%, Total Retail Price of R483 929 at a Guaranteed Future Value (GFV) of 64% based on 20 000 km pa, Total Repayment Price of R509 695. Monthly Service Fee of R57.00 (not included in the Monthly Instalment). Upfront Initiation Fee of R1 140.00 (including VAT). Offer valid until 30 September 2015 subject to availability at participating dealers only. Please can you find out more about this agility finance for I want to purchase one of these cars? I would like to know if it permissible.

A:
The main thing in such a finance option is whether the monthly instalment is fixed for the entire duration of the repayments. If it IS fixed, then the lease agreement will be permissible and valid. Otherwise, not.

Allah Ta’ala knows best

Mufti Siraj Desai

Leasing to a Bank

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Q: 1. Is it permissible for an Islamic organisation to rent/lease their property out to a bank?
2. If not, and its already leased out, what is the way forward?

A
: It is not permissible for Muslims to lease premises to a bank. This falls under the Quranic prohibition of aiding and abetting sin. In this case, it is the sin of ribaa.

If premises were already leased to the bank then, firstly, an attempt should be made to cancel the lease. The organisation should consult with its attorneys to see if this is possible, though with banks it might be difficult to do this. So if this is not possible then the next thing to do is to inform the bank that its lease will not be renewed once it expires. Thereafter rental received from the bank should not be used for Musjid or madresa. Instead the organisation should spend it on welfare and social work, such as feeding schemes for the poor, grants to the poor and needy, food parcels, blankets, even bursaries for poor students, etc.

Allah Ta'ala knows best

Mufti Siraj Desai
Darul-Uloom Abubakr
Port Elizabeth
South Africa

Using Interest for School Fees

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Q: Is it permissible to pay school fees at a secular private school using interest money, e.g interest from a fixed deposit at a commercial bank?

A:
This is not permissible because one is benefiting from the school. There is a service being rendered. Being a secular school does not make a difference.

Moulana Yusuf Laher

Loan Involving Two Currencies

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Q: Mufti sahib I went in to a transaction with a brother as follows :

I wanted some cash money for my business so I told the brother if he would be interested in some US$ which I will sell him at a much lesser rate then the prevailing rate, e.g. prevailing rate K5.00 /$1 and offered rate K3.7 /$1 where he must give me the local currency (Kwacha) and I will only give the dollars to him after a year.

Finally we agreed on an amount US $100,000 for which he gave me KWACHA K370,000/ as per agreed rate. When time came for me to give him the US DOLLARS $100,000 I didn’t have the cash so I asked the brother if we could turn around once more on a new rate and we continued turning around the same initial amount for 3 years as I didn’t have the money, eventually the amount had increased 3 folds.

During this period I did give him some little  money  but in Kwacha, I still haven’t paid him and now I have been told my some ulema that such transactions are not permissible.

Mufti Sahib  when the deal was agreed in 2011. Some ulema had permitted such transactions but later they also disapproved of such transactions.

1)      Are such transactions allowed?
2)      Does the transaction remain valid since it was allowed during that period and the fatwa came later?
3)      Turn around of the same deal again and again due to not having the money allowed?


A: The initial deal was permissible. To exchange one currency for another on an agreed rate is lawful, as long as one of the two currencies was taken possession of. You did take possession of the Kwachas, so that made the deal lawful. A fixed rate of exchange was also agreed on.
However, after one year it was not permissible to turn around the debt on a new rate. In effect, it meant that you had increased the amount of money you owed him, and such increase was based solely on the fact that you were unable to effect payment at the stipulated time. This is the exact type of riba or usury that the Holy Quran has prohibited: interest charged for an extension of payment. Likewise the increase that you agreed upon in the following two years was also haraam for it constituted ribaa.

At this stage the deal is still valid but you only owe him the initial $100,000 and nothing more. You need to inform him that whatever agreement the two of you had made to increase the amount of dollars by lowering the agreed rate of Kwacha/Dollar, is now null and void. The first amount agreed upon when the deal was done, will remain in force. Whatever money you paid him in Kwachas must be calculated according to the initial rate of K3.7 /$ and deducted from the total debt.

Make taubah sincere for agreeing to a riba deal. Allah Ta'ala knows best


Mufti Siraj Desai
Darul-Uloom Abubakr
Port Elizabeth
South Africa

Investment Scheme

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Q: I would like to know if the following would be shariah compliant: There is an investment in which everyone pays money for their share, but there are 2 groups: an A and a B group. A group takes profit as long as it is 60cents or less and group B gets money only if profit exceed 60cents up to 20 cents. So B gets no profit if 60 cents or less is made and over the 60 cents group B takes profit until 120 cents. If it exceeds 120 they will calculate something.

A:
The investment scheme that you described is not compliant with Shariah. Hence, it is not permissible. In a partnership it is necessary that all investors receive a dividend from the profits on a percentage basis in proportion to their investment. By paying out some shareholders under certain conditions and excluding others, this requisite is violated. Furthermore, profit sharing must be based on percentage. It is not permissible to fix an amount in cash terms as profit. It is only correct when each shareholder is promised a percentage of the total nett profits. For this reason, too, the investment scheme in question will not be permissible.

Perhaps if you explain why and for what purpose did the partners agree to such an unusual form of distribution, we might be able to suggest an alternative that will be Shar'ee compliant. What did they wish to achieve though a dispensation of this nature?

Mufti Siraj Desai
Port Elizabeth

Buying Shares on Stock Exchange

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Q: I have started buying shares. I bought some shares in an oil company. Is this buying is halaal or haraam?

A:
It is not permissible to accept a share allocation in companies that are listed on the stock exchange. 

Reasons:
Investing or buying shares in the Stock Exchange falls under the Islamic transaction of Shirkat or partnership. The Shariah has ordained a fixed set of rules to govern the different forms of partnership.

For example, in an Islamic partnership one who invests in a running business becomes the owner of all the stock and assets of that business in proportion to the investment. But when considering the method and procedure of buying shares on the Stock Exchange, it emerges that the purchaser or shareholder who has bought stock is not considered a real partner. In the Stock Exchange the investors don’t become partners in the assets such as fixtures and fittings, or property if any, nor do they own a share in the stock of the company. They are only entitled to a share in the profit. This is contrary to Shar’ee partnership.

Secondly, in Shar’ee partnership profits must be apportioned according to percentage, but this is not the case with shares. Instead the company’s stock and assets are divided into a fixed number of shares and sold at a fixed price to buyers. When one buys a share one has invested that amount of money into the company. In return one should be promised a portion of the profits. What the Stock Exchange does is it awards shareholders a share of the profits in proportion to the value of their share certificates at a particular time of the year. That value may fluctuate for a number of reasons, as I shall outline further. Islamic partnership demands that the profit should be stipulated in advance and should be in a percentage form and should be commensurate with profits generated by the company after deduction of expenses and overheads,

When one sells share certificates, one is not selling his share in the company. It is merely a “right to profits” that is being sold, and this in itself is not permissible. Mere rights may not be sold according to Shariah.

Another point of departure from an Islamic perspective is that the rise and fall of share values on the Stock Market is not always influenced by the profits generated by the company. There are a number of political factors that enter the equation when determining share values. So when one decides to sell his or her share certificates, one may not obtain a value that is commensurate with the profits generated by that company. This in itself invalidates any form of partnership. As such, when one sells shares there is an element of riba or interest involved because you are selling an intangible value in exchange for money. Had the share certificate entitled one to a proper and fully fledged share in the company’s assets, property, and stock, then at least it could be said that one is selling a portion of a tangible commodity which is valid in Shariah. But that is not the case in Stock Exchange shares.

Furthermore, a rule of partnership is that any partner wishing to sell up has to offer his share to the current shareholders, not to any outsider. This rule is also broken in the current Share business because one may sell to any willing buyer of one’s choice.

For these reasons and more, it will not be permissible to trade in the Stock Exchange.

And Allah The Almighty knows best.

Mufti Siraj Desai

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