Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

Financial Reforms for Social Development by

Holy Prophet in Medinian Society (Peace and

Blessings be upon Him) *Jehanzaib Waqas Gadgore

Abstract

Social development is prioritizing human needs in the growth and progression of society.

It also governs the norms and conventions that govern human interaction. The focus is on

improving the lives of citizens, especially the poor, to make society a better place for

everyone. Social Development focuses on the need to “put people first” in development

processes. Poverty is more than just low income. It is also about vulnerability, exclusion, unaccountable institutions, powerlessness, and exposure to violence. Social Development

promotes social inclusion of the poor and vulnerable by empowering people, building

cohesive and resilient societies, and making institutions accessible and accountable to

citizens.1 In achieving, the ultimate objective of self-sufficiency, favorable, fair and

conducive regulatory environment is mandatory for carrying out business and trade

activities. Fiscal system, therefore; becomes the most vital area to regulate and administer

by any reformist and just ruler. Financial sector was one of the most important areas

which were regulated by the Holy Prophet (Peace and Blessings be upon Him) in the

light of divine guidance. There were three kinds of contracts and practices in Arab when

prophet hood was awarded to Holy Prophet (Peace and Blessings be upon Him). Firstly,

contracts and practices which were contradicted to principles of Shariah and were prohibited. Secondly, contracts and practices which were having objectionable elements

but can be refined so the Holy Prophet (Peace and Blessings be upon Him) imposed

certain conditions to carry out those contracts and practices by the believers. In this way,

those contracts and practices were made fully Shariah compliant. Lastly, new contracts

and practices, which were new to Arabs, were introduced by the Holy Prophet (Peace and

Blessings be upon Him) through Shariah injunctions.

Keywords:

Landmark objectives which were established to achieve through different

financial reforms were, in the words of Qurān:

منكم ت راض عن تجارة تكون أن إل بالباطل ب ي نكم أموالكم تأكلوا ل آمنوا الذين أي ها يا

O ye who believe! eat not up your property among yourselves In vanities: but let there be amongst you traffic and trade by mutual good-

will. 2

And

منكم الغنياء ب ين دولة يكون ل كي

That it may not (merely) make a circuit between the wealthy among

you.3

*Ph.D Islamic Banking & Finance, International Islamic University, Islamabad. 1 http://www.worldbank.org/en/topic/socialdevelopment/overview#1 last accessed on 19-11-2016 at 7:28 a.m. 2 Qurān, 4:29. Source of translation of the Glorious Qurān, in this article, is Abdullah Yousuf Ali. 3 Qurān, 59:7.

Pakistan Journal of Islamic Research Special Issue

All reforms revolve around achieving these two most important and vital

objectives so that no one, in a Muslim society, can exploit the financial rights of any

other. Some of the reforms introduced by the Holy Prophet (Peace and Blessings be upon

Him) in Medinian society were new and many were refined formats of the existing

practices of the Arabs. In the light of these financial reforms, modern Islamic economists4

are clear that to achieve economic development within moral values of Islam is a fundamental objective of Islamic economy.

Holy Prophet (Peace and Blessings be upon Him), as head of state, launched

these reforms associated with several moral teachings and motivations that even modern

world is in need to understand prophetic approach for solving its complex financial

issues. By linking morality and concept of reward and punishment in the world hereafter

with day to day affairs helped Muslims to attain and then sustain economic and social

development for centuries. This paper aims to explain said Prophetic approach to attain

social as well as economic development in a way that modern world can understand and

derive principles for achieving the same objectives of social and economic development.

Contracts and practices which were prohibited are Riba, Gharar, Drugs,

Hoarding and invalid transactions. Similarly, practices and contracts which were

regulated and refined are salam, istisna, free market mechanism and land reforms including Ihya al-Amwat, Muzarat and Musaqat. Newly introduced practices aiming at

social and economic development were Zakat, Usher, kaffarat, sadaqat-ul-Fitr, Nafaqaat

(maintenance), Waqf (endowment), Khiyarat, shares for relatives and Fay’. In the

following passages, we shall discuss that how these reforms were introduced, refined and

implemented by Holy Prophet (Peace and Blessings be upon Him) in Medinian society

and lessons for our learning so that we may apply those in today‟s world to avoid

financial and social harms which will definitely occur while ignoring these Prophetic

methodologies.

Prophetic Initiatives to launch Islamic Financial System:

Now we shall discuss initiatives taken by the Holy Prophet (Peace and Blessings

be upon Him) in Medinian society to introduce, launch and implement the basis of Islamic Financial System. These initiatives were aimed to achieve social and economic

development including equitable distribution of income and non-concentration of wealth

among rich segment of society.

1. Main prohibitions to stop financial exploitation:

Contracts and practices declared prohibited were aimed at to make sure that

members of Muslim society could not exploit the poor and to block the malpractices

through which people were used to take property of others in pre-Islamic era. First and

the most significant prohibition is this regard is the prohibition of Riba (interest). Islam

has shown zero tolerance for riba. Purpose of this severe prohibition is to ensure that

major source of exploitation can be removed from economy. By prohibiting riba, Muslim

society achieved the objective of distributive justice. Historical evidences are proof that

by following Prophetic teaching in this regard Muslim communities achieved levels of prosperity within very short span of time. Holy Qurān clearly prohibited it:

. الربا وحرم الب يع اللو وأحل

4 Muhammad Umer Chapra, Towards a Just Monetary System (Leicester: The Islamic Foundation, 1986), p. 34.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

But Allah hath Permitted trade and forbidden usury. 5

and

اللو من بحرب فأذنوا ت فعلوا لم فإن. مؤمنين كنتم إن الربا من بقي ما وذروا اللو ات قوا آمنوا الذين أي ها يا

.تظلمون ول تظلمون لأموالكمرءوسف لكمت بتموإن ورسولو

O ye who believe! fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. If ye do it not, take notice

of war from Allah and His Messenger. but if ye turn back, ye shall have

your capital sums: Deal not unjustly, and ye shall not be dealt with

unjustly. 6

This prohibition was not made at once, however; it was gradual. First revelation

was revealed five years before Hijrah and the last one (fifth), final was revealed before

the Farewell Pilgrimage (Hajjat-ul-Widaa).7 On several occasions, Holy Prophet (Peace

and Blessings be upon Him) endorsed and explained this extremely serious prohibition.

Following two sayings of the Holy Prophet (Peace and Blessings be upon Him) are very

important to mention here:

This narration is from Jabir (RA). He said that Allah‟s Messenger

(Peace and Blessings be upon Him) cursed the persons who ate riba, gave riba, documented a ribawi deal or stood witness to it. According

to Jabir (RA), the Prophet (Peace and Blessings be upon Him) further

said that all of the said persons were equal (in violating the ahkam on

riba and, hence, being subject to the curse).8

This hadith is reported by Abu Hurairah (RA). According to him, the

Prophet (Peace and Blessings be upon Him) said that the sin of riba

equaled seventy sins with the slightest of them being equal, in

despicability, to incest with one‟s own mother.9

IIIE‟s Blue print contains twenty four sayings of the Holy Prophet (Peace and

Blessings be upon Him) on the same subject.10 These sayings of the Holy Prophet have

been mentioned under five points which are firstly, status of various parties to a Ribawi transaction, secondly, on indulging in Riba, thirdly, on Riba in loans and other

transactions, fourthly, on creditor-debtor relations and lastly, on outstanding loans and

debts. Prohibition of riba was not a new reform for believers and non-believers. Many of

them were aware of the fact that Quraish did not accept money earned through riba for

the reconstruction of Holy Kaaba. They announced that for this noble cause, earning

through prostitution, riba and snatched from others will not be included in the collective

5 Qurān, 2:275. 6 Qurān, 2:278-279. 7 Sayyid Tahir and others, IIIE’s Blueprint of Islamic Financial System including Strategy for Elimination of Riba (Islamabad: International Institute of Islamic Economics, 1999), p. 11-13. This blue print was in fact report of IIIE workshop on “Islamization of Financial System” held in May-June 1997. It is very important to understand that as Holy Qurān was revealed over a period of almost 23 years and Allah (SWT) has mentally prepared the companions of Holy Prophet (Peace and Blessings be upon Him) to accept and absorb the prohibition of several activities which were very deeply rooted in Arabian pre-Islamic civilization. Prohibition of Riba was declared „absolutely prohibited‟ gradually in same way as prohibition of wine was declared gradually. 8 Abū al-Ḥusayn „Asākir ad-Dīn Muslim ibn al-Ḥajjāj ibn Muslim ibn Ward ibn Kawshādh al-Qushayrī an-Naysābūrī, Sahih Muslim, 2995. 9 Abū ʻAbdillāh Muḥammad ibn Yazīd Ibn Mājah al-Rabʻī al-Qazwīnī, Sunan IbneMajah, 2265. 10 Tahir, p. 14-19.

Pakistan Journal of Islamic Research Special Issue

fund.11 However; it was an example of their poor morality that they practiced riba

knowingly that it is not lawful.

In contemporary world, issues and questions about interest charged by banks

have been raised by the economists. Many contemporary scholars have answered their all

questions very comprehensively and have proved that there is absolutely no difference

between interest charged by the banks and riba prohibited by Holy Qurān and Holy Prophet (Peace and Blessings be upon Him).12

Second important prohibition in Islamic Financial system is the prohibition of

Gharar. It refers to the uncertainty or hazard caused by lack of clarity regarding the

subject matter or the price in a contract or exchange. A sale or any other business contract

which entails an element of Gharar is prohibited. In the legal terminology of Shariah,

“Gharar” is the sale of a thing which is not present at hand or the sale of a thing whose

“Aqibah” (consequence) is not known or a sale involving hazard in which one does not

know whether it will come to be or not, e.g. the sale of a fish in water, or a bird in the

air.13 A number of Companions of the holy Prophet (Peace and Blessings be upon Him)

have reported the prohibition of sale having Gharar from the holy Prophet. While a

number of books of Hadith and Islamic jurisprudence mention this special form of

prohibited sale. For example, Imam Bukhari in his Sahih, has not reported the Hadith on sale including Gharar but captioned a chapter “Al Gharar Sale and Habal-al-Hablah14”.

Under this heading, he reports the Hadith forbidding the Habal-al-Hablah and trading by

“Mulamasah”15 and “Munabadhah”16.

Eminent contemporary scholar Shaikh Al-Dhareer has classified the principles

covering Gharar under the following headings.17 Firstly, in the terms and essence of the

contract which includes (a) Two sales in one, (b) Down payment („Arbun) sale, (c)

“Pebble”, “Touch” and “Toss” sales, (d) Suspended sale, and (e) Future sale. Secondly, in

the object of the contract which includes (a) Ignorance about the genus, (b) Ignorance

about the species, (c) Ignorance about attributes, (d) Ignorance about the quantity of the

object, (e) Ignorance about the specific identity of the object, (f) Ignorance as to time of

payment in deferred sales, (g) Explicit or probable inability to deliver the object, (h) Contracting on a nonexistent object and (i) Not seeing the object.18

11 Maulana Safi-ur-Rehman Mubarakpuri, al-Raheeq al-Makhtoom (Lahore: al-Maktaba al-Salfia, 1995), p.92. 12 See, for instance: Imran Ahsan Khan Nyazee, Concept of Riba and Islamic Banking (Islamabad: Advance Legal Study Institute, 2008); Mufti Muhammad Shafi, Mas’ala e sood (Karachi: Idara tul Ma„araf, 2013); Maulana Gohar Rehman, Hurmat e sood: Ashkalat ka ilmi jaeza (Lahore: Idara Ma„araf e Islami, 1997); Maulana Syed Abu al-A„ala Maudoodi, Sood (Lahore: Islamic Publications). All writers have explained the underlying cause and the objectives of Shariah in

prohibiting both types of riba (i.e. riba al-dayun and riba al-buyuh) by Qurān and Sunnah. 13 Muhammad Ayub, Understanding Islamic Finance (England: John Wiley & Sons, 2007), p. 57. 14 Habal-al-Hablah” is sale of what is in the womb of the animal. 15 Mulamasa is a buy for pre-fixed price with closed eyes or in darkness just by the first touch of the hand. For instance, a man goes to a cloth merchant and proposes to him to buy a roll of cloth for a pre-fixed price. He agrees to buy it on the condition that he will close his eyes and will go to touch the mils, then he will buy whichever mil he touches first. 16 Munabadha is to throw the mil of cloth in the dark to each other, and to accept whatever the

catch is without seeing the goods. For detail see, al-asqalani, p. 260. 17 Siddiq Mohammad AI-Ameen Al-Dhareer, Al-Gharar in Contracts and its Effect on Contemporary Transactions (Jeddah: Islamic Research & Training Institute, 1997), p 15-20. 18 Ibid., p. 21-34.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

In order to avoid uncertainty, Islamic law denies the power to sell in the

following three situations:19

Firstly, things which, as the object of a legal transaction, do

not exist. Secondly, things which exist but are not in possession of the seller or the

availability of which may not be expected. Lastly, things which are exchanged on

uncertain delivery details and undetermined payment basis. Details of Gharar are

important to understand and comprehend as it is the second major prohibition in Islamic law after riba. Contemporary scholars have written in detail about different types of

Gharar in modern financial transactions.20

Third main prohibition is related to intoxication businesses and gambling. The

words Maisir and Qimar are used in the Arabic language identically. Maisir refers to

easily available wealth or acquisition of wealth by chance, whether or not it deprives the

other‟s right. Qimar means the game of chance – one gains at the cost of other(s); a

person puts his money or a part of his wealth at stake wherein the amount of money at

risk might bring huge sums of money or might be lost or damaged.21 Maisir has been

used in Holy Qurān and Qimar has been used in Hadith of the Holy Prophet (Peace and

Blessings be upon Him). We may use their alternative in English as gambling. Purpose

for prohibiting activities which can be labeled as gambling is that those are not real world

economic activities which Islamic Financial system desired in an economy regulated by Islamic injunctions. Allah (glory is to Him) prohibited gambling and drugs in the

following verse of Holy Qurān:

يطان عمل من رجس والزلم والنصاب والميسر الخمر إنما آمنوا الذين أي ها يا .ت فلحون لعلكم فاجتنبوه الش

O ye who believe! Intoxicants and gambling, (dedication of) stones,

and (divination by) arrows, are an abomination, of Satan's handwork:

eschew such (abomination), that ye may prosper. 22

In modern economic practices, many schemes including lotteries or prize-

carrying schemes and bonds that banks launch from time to time fall under category of

gambling and thus are impermissible. Similarly, Drinking wine has been prohibited by

the Almighty (glory is to Him) as cited above. Holy Prophet (Peace and Blessings be

upon Him) has also cursed the people dealing in wine as under:

إليو والمحمولة وحاملها وشارب ها ومعتصرىا عاصرىا عشرة الخمر في اللو رسول لعن قال مالك، بن أنس عن

. لو والمشت راة لها والمشتري ثمنها وآكل وبائعها وساقي ها

“Hazrat Anas Ibn Malik narrated a Hadith that The Messenger of Allah

(Peace and Blessings be upon Him) has cursed on ten people involved

in wine: The one who presses it, the one for whom it is pressed, its

drinker, its carrier, and the one for whom it is carried to, its server, its

seller, the one who consume its price, the one who purchases it and the

one for whom it is purchased for". 23

On another occasion Holy Prophet (Peace and Blessings be upon Him) declared:

19 Ayub, p. 60. 20 See, for instance: Ijaz Ahmed Samdani, kinds of Uncertainty (Karachi: Idara tul Ma„araf, 2011). 21 Ayub, p. 61-62. 22 Qurān, 5:90. 23 Abu Iisa Muhammad IbnIisa Al-Tirmadhi, Kitab al-Buyu„ An Rasulillah (Peace and Blessings be upon Him), Bab al-Nahy an Yuttakhadh al-KhamrKhala.

Pakistan Journal of Islamic Research Special Issue

الخبائث أم فإن ها الخمر اجتنبوا“Abstain from Khamr (wine), because it is the mother of

all evils.”24

Declaring wine prohibiting is again aimed at providing healthy environment in

society where members consciously remain away from intoxication so that their

intellectual abilities can be protected and can be used positively in social building and economic welfare.

Fourth important prohibition is related to different transactions which have been

categorically banned by the Holy Prophet (Peace and Blessings be upon Him) as well.

Firstly, short selling in which the subject matter is sold by the seller without getting its

possession and is prohibited by the Holy Prophet (Peace and Blessings be upon Him) as

under:

“Whoever purchases food stuff, should not sell it until he

takes its possession”.25

Short selling in currency market, equity markets, and commodity markets in the

current world scenario falls under the same category.26 Secondly, sale of debt (bai al-

dain) in which a person has a debt receivable from a person and he wants to sell it at a discount (as normally happens in a bill of exchange), it is termed in Shariah as “sale of a

debt”. Traditional Muslim jurists are unanimous that sale of debt is not allowed in

Shariah.27 In fact, prohibition of bai al-dain is logical consequence of prohibition of riba

or interest. A debt receivable in monetary terms corresponds to money, and every

transaction where money is exchanged from the same denomination of money, the price

must be at par value.

Thirdly, bai al-kali bil-kali, in which both the subject matter and the price are

deferred after the execution of the sale contract. It is not allowed since either price or

delivery of the subject matter can be deferred at a time but both these elements cannot be

deferred in a single sale transaction because debt against debt is prohibited to sell.28

Fourthly, buy back (bai al-Inah), in which a person sells some object on credit for a

certain price and then buys it back at a price less than the sale price on prompt payment. Both transactions taking place simultaneously in the same session of contract. An

example of Inah is that a person asks someone to lend him a certain amount of money.

He refuses the money in cash and instead offers him an article at a higher price than the

amount of the requested loan. Then, he buys back the same article from him at a lower

price i.e., equal to the amount of the requested loan. In this way he makes him indebted

for the larger amount, which includes the amount of the requested loan in addition to the

increase, which is in fact Riha (interest).29

Let‟s simplify above example, „A‟ asks a loan

24 Ahmad Ibn Shoaib Al-Nasai, Sunan Al-Nasai, Kitab Al-Ashrebah, Bab Dhikr al-Atham al-Mutawallidah an Shurb al-Khamr. 25 Abū 'Abd Allāh Muḥammad ibn Ismā'īl ibn Ibrāhīm ibn al-Mughīrah ibn Bardizbah al-Ju'fī al-Bukhārī, Sahih Bukhari, Vol. 3, Hadith 2133. 26 Muhammad Imran Ashraf Usmani, Islamic Finance (Revised and Updated edition of Meezan Bank’s Guide to Islamic Banking) (Karachi: Quranic Studies Publishers, 2015), p. 99. 27 Ibid. p. 100. 28 Ibid. 29 Al-Haafidh Shihabuddin Abu'l-Fadl Ahmad ibn Ali ibn Muhammad al-Asqalani, Bulugh al-Maram: Attainment of the objective according to Evidence of the Ordinances (Riyadh: Darussalam Publishers & Distributors, 2002), p. 271-272.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

of $10 from „B‟. „B‟, instead of asking for interest on this loan applies a contrivance. He

sells an article to „A‟ for $12 on credit and then buys back from him the same article for

cash at $10.30

It is called Inah because the ayn (substance) in this case returns to its owner. The

majority of Muslim jurists consider this transaction invalid because the intended

objective of the transaction opposes the objectives laid down by Lawgiver. This form of transaction, in their view, is nothing more than a legal device aimed at circumventing the

obstacle posed by the prohibition of riba.31 These jurists establish the prohibition of this

transaction by a tradition of Aisha (RA) when Umm Mahabbah informed her that she had

a slave girl whom she sold on credit to Zayd ibn Arqam for eight hundred dirhams. Zayd

soon decided to sell the slave, so Umm Mahabbah bought her back for six hundred on

immediate payment. Aisha (RA) said, “What you sold was bad, and bad was what you

bought. Make it known to Zayd that his jihad alongside Messenger of Allah (glory is to

Him) has been nullified, unless he repents”. Umm Mahabbah asked her, “What if I

should just take my capital from him”. She replied, “Those who after receiving direction

from their Lord desist shall be pardoned for the past”.32

Imam Shafi maintains that bai al-

inah is permissible. The hadith of Aisha (RA) is not established in his view.33

Fifthly, Bai al-Wafa, in which a person who is in need of money sells a commodity to a lender on the condition that whenever the seller wishes, the lender (the

buyer) would return the purchased commodity to him upon surrender of the price. The

reason for its designation as wafa is the promise to abide by the condition of returning the

subject matter to the seller if he too surrenders the price to the buyer. Like bai al-Inah,

this transaction is also a legal device for riba. The purchaser in this case is a creditor who

benefits from the object held in his custody as pledge till the debtor pays him back his

amount and retrieves his object. Islamic injunctions on pledge clearly provide that the

creditor is not entitled to make profit out of the pledged property. Any profit drawn from

it is interest.34

Sixthly, Hatt wa ta„jjal, which is similar to present day discounting of trade bills

in banks. Under this transaction, the lender hastens the repayment of his delayed debt by taking an amount that is less than the value of the debt. He accepts his money ahead of

the time of maturity in lieu of discount on his principal amount. Majority of Muslim

jurists are agreed that it is prohibited in Shariah.35 Lastly, two sales in one, in which the

seller fixes two prices for an article. One price for cash payment and the second price for

credit purchase. The extra money added to the credit purchase is considered interest, and

therefore unlawful. Abu Huraira (RA) narrated that Allah's Messenger forbade combining

two transactions in one.36

30 Usmani, p. 100. 31 Muhammad Tahir Mansoori, Islamic Law of Contracts and Business Transactions (Islamabad: Shariah Academy, 2011), p. 133. 32 Ibid. p. 133-134. 33 Ibid. 34Ibid. 35 Ibid, p. 134-136. 36 Al-Asqalani, p. 258. [This hadith is reported by Ahmad and An-Nasa'i. At-Tirmidhi and Ibn Hibban graded it Sahib (authentic)]

Pakistan Journal of Islamic Research Special Issue

2. Reforms aimed at correction of existing contracts and practices:

Now we shall discuss corrective measures carried out by Holy Prophet (Peace

and Blessings be upon Him) in Medinian society to make existing practices and contract

Shariah compliant. These correctives measures were also aimed to achieve social and

economic development including equitable distribution of income and non-concentration

of wealth among rich segment of society.

a) Salam:

Legitimacy of Slam contract has been established through Holy Qurān37, the

Sunnah of the Holy Prophet (Peace and Blessings be upon Him)38 and Ijma (consensus of

the legal community)39. In Salam, the seller undertakes to supply specific goods to the

buyer at a future date in exchange of an advance price fully paid at spot. The payment is

at spot but the supply of purchased goods is deferred.40 This contract of Salam is an

exception in general principles of Islamic commercial law. It has been declared

permissible just to support agricultural sector especially to small farmers and keeping in

view the needs of traders for import and export business. As it is an exception in general

principles of Islamic commercial law, therefore; several conditions were imposed to

make sure that it is serving the intended purpose of Lawgiver. Due to the efforts of jurists

of all times, over centuries, this contract has evolved as an important mode of financing in Islamic finance. Some important conditions for its validity are as under41:

1. 100% advance payment is compulsory to be made.

2. It is for only those goods whose quantity and quality can be determined easily.

3. Product from a particular field or on a particular commodity cannot be sold

through Salam contract.

4. All details in respect to quality of goods sold must be expressly specified

leaving no ambiguity, which may lead to a dispute.

5. Quantity of commodity must be agreed upon in absolute terms. It must be

measured or weighed in its usual measure only, meaning what is normally

weighed cannot be quantified and vice versa.

6. The exact date of delivery and place must be specified in contract. 7. Salam cannot be affected in respect of items, which must be delivered at spot.

For example, if gold is purchased in exchange of silver, it is necessary that the

delivery of both commodities be simultaneous, thus gold or silver cannot

become subject matter of Salam, if price is paid in form of gold/silver.

37 Qurān, 2:282. سمى فاكتبوه يا أيها الرين آمنوا إذا تداينتم بدين إلى أجل م (O ye who believe! when ye Deal with Each other, In transactions involving future obligations In a fixed period of time, reduce them to writing). Ibn Abbas (RA) said that this verse revealed for the particular purpose of making Salam permissible. See Shariah standards (English version, 2004-5 edition) published by Accounting and

Auditing Organization for Islamic Financial Institutions (AAOIFI), p.171. 38 On the level of Sunnah, Ibn Abbas (RA) is reported to have said: the Holy Prophet (Peace and Blessings be upon Him) came to Medina and found that people were selling dates for deferred delivery after a duration of one or two years on a Salam basis. The Holy Prophet (Peace and Blessings be upon Him) said: Whoever pays for dates on a deferred delivery basis (Salam) should do so on the basis of a specified scale and weight. In another version of Hadith whoever pays on a deferred delivery basis should do so on the basis of a specified scale, weight and date of delivery. See, for instance: Shariah Standards for Islamic Financial Institutions (Manama: Accounting and

Auditing Organization for Islamic Financial Institution, 2010) p. 171. 39 Ibid. 40 Usmani, p. 161. 41 AAOIFI‟s Shariah Standards, p. 163-166.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

8. According to majority of jurists, commodity for Salam contract should be

available in the market at the time of delivery.

9. The seller at the time of delivery must deliver commodities and not money to the

buyer.

b) Istisna:

Istisna is another exception in general principles of Islamic commercial law. This contract is kind of sale where a commodity is transacted before it comes into

existence. It means to order a manufacturer to manufacture a specific commodity for the

purchaser. If the manufacturer undertakes to manufacture the goods for him with material

from the manufacturer, the transaction of istisna comes into existence. But is necessary

for the validity of istisna that the price is fixed with the consent of the parties and that

necessary specification of the commodity (intended to be manufactured) is fully settled

between them.42 Legitimacy of Istisna contract has been derived from the Sunnah of the

Holy Prophet (Peace and Blessings be upon Him).43 Istisna is a binding contract and is

not a mere promise. International Fiqh Academy has issued a resolution in support of the

legitimacy of Istisna.44 It facilitate artisans in the community. As it is exception in general

principles of Islamic commercial law like Salam however; there are certain differences

between contracts of Istisna and Salam as under45: i. In Istisna, the subject matter must be an item which needs to be manufactured

but in Salam, it can be anything that may or may not need manufacturing.

ii. In Istisna, price does not necessarily need to be paid in full in advance. It can be

made in installments according to the agreement of the parties but in Salam,

price has to be paid in full in advance.

iii. In Istisna, time of delivery does not have to be fixed but in Salam time of

delivery is an essential part of the contract.

iv. In Istisna, the contract can be cancelled before the manufacturer starts the work

but in Salam, contract cannot be cancelled unilaterally.

Istisna has remained, and still is, very successful mode of financing throughout

Islamic history and jurists of all ages have contributed in devising conditions for the achievement of objectives of Lawgiver through this contract.

c) Free Market Mechanism:

Holy Prophet (Peace and Blessings be upon Him) encouraged free market

mechanism by keeping in view two fundamental objectives. Firstly, to ensure availability

of basic necessities of life to general public without any delay and on reasonable market

determined prices. Secondly, to ensure preservation of interests of businessmen and

traders so that their rights to have justified profits could be achieved in competitive

environment. While achieving the above two objectives, Holy Prophet (Peace and

Blessings be upon Him) introduced following reforms:

i. Establishment of tax free zone/market:

Holy Prophet (Peace and Blessings be upon Him) gave much importance to the

well-being of his companions. He (Peace and Blessings be upon Him) was so curious that

42 Maulana Muhammad Taqi Usmani, An introduction to Islamic Finance (Karachi: Quranic Studies Publishers, 2014), p. 195 43 The Holy Prophet (Peace and Blessings be upon Him) ordered that a pulpit (a platform) for

preaching and a finger ring be manufactured for Him (Peace and Blessings be upon Him). These have been reported by Muslim and Bukhari. See, AAOIFI‟s Shariah standards, p. 191. 44 See, International Fiqh Academy‟s resolution No. 65 (3/7). 45 Imran Ashraf Usmani, p. 167.

Pakistan Journal of Islamic Research Special Issue

he intended to search for them a suitable market so that they might carry on their trade

activities freely as per his guidelines. He (Peace and Blessings be upon Him) searched

and when he (Peace and Blessings be upon Him) could not find his desired place, he went

out of Medina and made a circle through his foot on the land and said that this is your

(Muslims) market. Look at the words of Holy Prophet (Peace and Blessings be upon

Him):

، ول يضربن عليو خراج ىذا سوقكم، فل ي نت قصن“This is your market. It will always be your market and no duty will be

levied on it”.46

He (Peace and Blessings be upon Him) himself established world‟s first tax free

zone/ market in which everyone was free to sell and purchase without any entry/ exit

taxes and there was no duty imposed by state. New market was not only established but

also attraction was made for the investors and traders to invest and carryout business

activities.

Holy Prophet (Peace and Blessings be upon Him) made his routine to visit this

newly established market place time and again and in this way state showed its interest to

supervise, monitor and regulate the market place whenever a need arose. Being head of state, Holy Prophet (Peace and Blessings be upon Him) ensured that businessmen/

traders do not harm each other by capturing undue places in the market. Once he (Peace

and Blessings be upon Him) was complained that trader has placed a tent in the market

which is a source of attraction for the customers and interests of business community

were being violated. He (Peace and Blessings be upon Him) responded quickly and

ordered to burn the tent immediately.

ii. Hoarding:

Islam has declared hoarding of all such necessities of life which brings difficulty

for general public. Meaning of one saying of Holy Prophet (Peace and Blessings be upon

Him) is that one who brings commodities of essential necessities gets permissible and

pure income whereas the one who hoard basic necessities for him is the curse.47 Human

intellect understands that hoarding disturbs the market system and it supports the capitalistic approach. On another occasion, Holy Prophet (Peace and Blessings be upon

Him) said (meanings of his saying are) that the one who hoard the food grains from

Muslims is committing a big mistake. Allah and his Prophet (Peace and Blessings be

upon Him) are free from his responsibility.48 Yousuf Hamid al-Aalim, in his PhD

dissertation, at al-Azhar University Egypt while discussing objectives of Shariah has

mentioned several sayings of the Holy Prophet (Peace and Blessings be upon Him)

regarding prohibition of hoarding.49 A few are reproduced here as under:

1. One who commits hoarding is sinful.

2. Only sinful commits hoarding

3. He who brings goods for sale is blessed with good fortune, but he who keeps

them till the price rises is accursed. 4. If anyone keeps goods till the price rises, he is a sinner.50

46 Sunan Ibn Majah (Chapter on Business Transactions), Vol. 3, Book 12, Hadith 2233 47 Wahba Zuhaily, Fiqh al-Islami wa-Adillatuhu, tr. Mufti Abrar Hussain (Karachi: Dar ul Ishaat, 2012), vol. 4, p. 39. 48 Ibid. 49 Hamid Yousuf al-Aalim, Maqasid Al-Shariah: Objectives & Wisdom, tr. Muhammad Tufail Hashmi (Islamabad: Islamic Research Institute, 2011), p. 516-519. 50 Ibid. p. 517.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

iii. Treatment of Fraud:

“Fraud is the concealment of facts and a promise made without any intention of

performing it to induce a person by such means with a view to obtain his consent to a

contract without which he would not have consented to the contract”.51 Muslim Jurists

have discussed several forms of fraud; some of them are described here. Firstly, Tasriyah

was prohibited. It is to tie udder of a she camel or sheep to allow the animal‟s milk to accumulate in her udder so as to give a false impression to the intending buyer of a very

productive milk-yield. Holy Prophet (Peace and Blessings be upon Him) declared about

this practice:

“Do not tie up the udder of a she camel and sheep. If anyone among

you buys a she camel or sheep whose udder have been tied up, has

option (of annulment) after milking it; either to retain it or to return

along with a measure of dates (in liu of the milk consumed by the

purchaser)”52

Secondly, Najash or Tanajush was prohibited. It is to offer a high price (false

bidding) for a commodity without any intention to buy it, the sole aim being to cheat

somebody else who really wanted to buy the commodity. Holy Prophet (Peace and

Blessings be upon Him) has prohibited this practice. He (Peace and Blessings be upon Him) said:

O people! With a view to bargaining with the people who come with

their animals laden with commodities for sale, do not go to meet them

(outside the town) and if a person is bargaining with another, do not

interfere by bidding higher.53

Thirdly, Talaqqial-Rukban was prohibited. In this transaction, a Bedouin was

cheated by a city-dweller who takes advantage of ignorance of Bedouin about market

prices and purchases objects of prime and general necessity for sale from him. The city-

dweller goes out of town to meet bedouin and buys his goods at a cheap rate. Holy

Prophet (Peace and Blessings be upon Him) declared:

“It is forbidden to meet the riders (i.e. the traders) on the road (for the purpose of taking undue advantages). Whosoever meets a trader on

road and buys goods from this trader, the vendor has the right of option

and cancellation of such deal when he arrives at the market”.54

Purpose of forbidding this practice was to give opportunity to Bedouin merchant

of first survey the market to acquaint himself of the current market rate so that his interest

of getting justified profit can be protected. On the basis of above three examples where

Holy Prophet (Peace and Blessings be upon Him) has protected the rights of traders and

consumers in markets of holy city of Medina, jurists had also declared following

practices as impermissible and have given option to the parties who have suffered loss to

annul the contracts55:

o Ghabn Fahish

o Inflated price in trust sale o Tadlis bi al-ayb (Fraud with defect)

51 The Contract Act 1872, p. 11. 52 Asqalani, p. 263. 53 Ibid., p. 259. 54 Ibid., p. 260. 55 See Mansoori, p. 149-152.

Pakistan Journal of Islamic Research Special Issue

Fourthly, to safeguard the interests of traders and consumers from fraud, Holy

Prophet (Peace and Blessings be upon Him) has given the option to party having loss

either to ratify the contract or annul within period of option. Muslim jurists, on the basis

of sayings of the Holy Prophet (Peace and Blessings be upon Him), have suggested a

number of devices to safeguard contracting parties. These devices are called Khayarat

(plural of word khiyar) i.e. options in Islamic law. Dr. Muhammad Tahir Mansoori has mentioned five kinds of options which are (i) Khiyar al-Shart (Option of condition), (ii)

Khiyar al-Tayin (Option of determination), (iii) Khiyar al-Ayb (Option of defect), (iv)

Khiyar al-Ruyah (Option of Seeing) and (v) Khiyar al-Wasf)56 (Option of Attributes).

These options in Islamic Law given by Holy Prophet (Peace and Blessings be upon Him)

are nothing else except tools to protect the rights of traders and consumers in Medinian

society.

Last is the issue of price fixation by state. General public was habitual to barter

trade in pre-Islamic era. In order to stop exploitation of poor and needy, Holy Prophet

(Peace and Blessings be upon Him) encouraged cash transactions and promoted the

culture of free market mechanism so that natural forces of demand and supply could

determine the prices of commodities. This was achieved by prohibiting riba al-fadl (also

known as riba al-buyuh). When the culture of price fixation developed through demand and supply mechanism sometimes prices increased and people complained to Holy

Prophet (Peace and Blessings be upon Him) about high prices. He (Peace and Blessings

be upon Him) did not fix the prices and let the market forces operate without any state

intervention. Purpose for not fixing prices by state was to discourage exploitation. With

the passage of time, over centuries, jurists have observed the behavior of traders and

market monopolists. They intended to preserve and achieve the same objective of

discouraging and stopping exploitation by fixing the prices through state intervention so

that right to access the basic necessities of life by poor and needy consumers can be

protected.57

d) Wirasat (Inheritance):

The Islamic system of inheritance has a basic importance in the Islamic system of the distribution of wealth. It is not really necessary to expatiate upon the inequity

produced in the distribution of wealth by the restricted forms of inheritance. One of the

greatest causes of the inequity that is found in Western countries in this sphere is just this,

and many economists have admitted this fact. The system of inheritance that is generally

prevalent in Europe is the rule of primogeniture. That is to say, all the property of the

deceased goes to the eldest son and all the other children are totally deprived of it.

Moreover, in certain places, a man can, if he so wishes, disposes of his whole property by

will to any person, thus depriving even his male offspring of a share in the inheritance.

As a result of this system, wealth gets concentrated instead of being circulated. On the

other hand, according to the Hindu code, the male members of the family jointly inherit

the property, and the females are totally excluded from inheritance. This is an obvious

injustice to women.58 Moreover, the sphere of the circulation of wealth is even narrower here than what it is under the Islamic system. On the contrary, the system of dividing

inheritance laid down by Islam does away with all these evils. Maulana Mufti

56 For detail of all these Khayarat (options), See, Mansoori, p. 165-175. 57 For details of juristic debate and recommendations, See, Hamid al-Aalim (tr. Hashmi), p. 519-520. 58 Mufti Muhammad Shafi Usmani, “Distribution of Wealth in Islam” (Karachi: begum Aisha Bawany waqf, 1979), p. 35.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

Muhammad Shafi has mentioned following characteristics peculiar to this Islamic system

are as follows:

(a) A long list of inheritors has been prescribed in accordance with the degrees

of relationship, because of which the inherited wealth gets a very wide circulation. It

should be noticed here that, in order to give a wide circulation to wealth, it could be as

well enjoined that the whole inheritance should be distributed among the poor or be deposited in the Bait-ul-Mal (Public Exchequer). But, in that case, everyone would have

tried to spend all his wealth during his own lifetime, and this would have only upset the

economy. It is for this reason that Islam has laid down a system which requires that the

inheritance should be divided amongst the relatives of the deceased an arrangement

which should be the natural desire of the owner of this wealth.

(b) As against all the other systems of inheritance in the world, Islam has given

to woman also the right to inherit property. The Holy Quran says:

From what is left by parents and those nearest related there is a share

for men and a share for women, whether the property be small or large,

a determinate share. 59

(c) The deceased has not been given the prerogative to deprive a legal heir of his

or her share, nor to make any kind of modification in the prescribed share of any heir.

This injunction puts a complete end to the possibility of a concentration of wealth

resulting from inheritance. The Holy Quran says:

Ye know not whether your parents or your Children are nearest to you

In benefit. these are settled portions ordained by Allah. 60

(d) No distinction has been made among children on the basis of priority of

birth. An equal share has been allotted to the elder and the younger.

(e) It has been forbidden to make a bequest in favor of an heir, in addition to the

prescribed share. Thus, no heir can receive anything from the estate of the deceased over

and above his or her own share of the inheritance.

(f) A part of the property can be bequeathed to one who may not be an heir. This

also helps in the circulation of wealth, for a part of the property is given away as legacy before the sharing of inheritance takes place. But a testator cannot dispose of all his

property by will. He is allowed to bequeath up to one third of his property, and has no

legal right to exceed this limit. This injunction thus serves to avoid that danger of the

concentration of wealth which would arise if a man were allowed to dispose of all his

property by will. At the same time, it also safeguards the rights of the near kindred.61

59 Quran, 4:7. 60 Quran, 4:11. 61 Shafi, p.35-37.

Pakistan Journal of Islamic Research Special Issue

3. New reforms aimed at social and economic development:

We shall discuss now new initiatives launched by Holy Prophet (Peace and

Blessings be upon Him), in the light of divine guidance, in Medinian society. These

Shariah injunctions were new for Arabs. Goals of social and economic development

including equitable distribution of income and non-concentration of wealth among rich

segment of society were targeting through these injunctions.

a) Zakat and Usher:

Zakat is the first and most important tool introduced by Islam in order to make

sure that wealth is not concentrated in few hands and is circulating in economy through

real economic activities. It has been declared second most important and basic obligation

imposed on believers after five compulsory prayers. It was his importance due to which

first caliph of Islam Abu Bakar (RA) launched wars against all those who differentiated

between Salah (prayer) and Zakat and consequently refused to pay Zakat. Order to pay

Zakat has been repeated several times in Holy Qurān along with Salah (prayer).62 The

meaning of Zakat is "to increase and to become pure". Because the payment of Zakat

leads to an increase in wealth and considered to be a reason for its cleansing. Zakat was

declared an obligation in the year 2 H., prior to the proclamation of the ruling concerning

fasting. Narrated Ibn 'Abbas (RA), the Prophet (Peace and Blessings be upon

Him) sent Mu'adh to Yemen ... - [here he mentioned the rest of the

Haditb which has]: "Allah has made obligatory for them, in their

wealth, a Sadaqa to be taken from their rich and returned to their poor."

[Agreed upon, and the wording is from Al-Bukhari].63

It becomes thus known to us that Zakat is obligatory on the rich among the

Muslims. This is meant to provide a financial assistance to the poor Muslims and that the

same cannot be given to the disbelievers. We are further informed that the Zakat

originating from a certain city should be distributed among the poor belonging to the

same city itself. Allah, the Almighty (SWT) has warned of painful punishment for those

who hoard wealth and do not pay Zakat. Holy Quran says:

And there are those who bury gold and silver and spend it not In the

way of Allah. Announce unto them a Most grievous penalty. On the

Day when heat will be produced out of that (wealth) In the Fire of Hell,

and with it will be branded their foreheads, their flanks, and their backs

- "This is the (treasure) which ye buried for yourselves: taste ye, then,

the (treasures) ye buried!" 64

62 Qurān, [2:43,83, 110,177,277], [4:77,162], [5:12,55], [6:141], [7:156], [9:5,11,18,60,71],

[19:31,55], [21:73], [22:41, 78], [23:4], [24:37,56], [27:3], [30:39], [31:4], [33:33], [41:7], [58:13], [98:5]. 63 Asqalani, p. 191. 64 Quran, 9:34,35.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

The common factor among these items of expenditure for Zakat which entitles a

person to receive it is “poverty” and “neediness”. And this head (Zakat) is chiefly meant

for the eradication of poverty. Similarly, landlords who are engaged in agricultural

activities, Ushr was imposed by Shariah as purification tool for their hearts and wealth. It

is Zakat of agricultural goods. It is compulsory payment to be paid by the believers in

terms of agricultural products depending upon total yield and the system of irrigation. Narrated Salim bin 'Abdullah on the authority of his father: The

Prophet (Peace and Blessings be upon Him) said, "A tenth is payable

on what is watered by rain or springs or by underground water, and a

twentieth on what is watered by irrigation [through human efforts]."

[Reported by Al-Bukhari]. Abu Da'ud has: "When it (farm produce) is

watered by underground water, a tenth is payable; but a twentieth is

payable on what is watered by irrigation, [water-wheels or that which is

drawn up from a well by a farm animal].'' 65

هاوالمؤلفةق لوب هموفيالرقابو ارمينوفيسبيلاللوإنماالصدقاتللفقراءوالمساكينوالعاملينعلي الواللوعليمحكيم. فريضةمناللو وابنالسبيل

Alms are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to

Truth); for those In bondage and In debt; In the cause of Allah. and for

the wayfarer: (thus is it) ordained by Allah, and Allah is full of

knowledge and wisdom. 66

Since human labor is comparatively less involved in this kind of production, the

rate of the levy here is 10%, or in some cases 20% instead of 2.5%.67 Wealth collected

through Zakat and Ushr will be spent for welfare and consumption of poor and needy.

Expenditures to be made by Zakat and Usher money have also been specified by Holy

Qurān as under:

b) Kaffarat:

Islam has prescribed another regular mode of transmitting wealth to hundreds of individuals in a society, and that is the mode of “Kaffarat” (expiation money). If someone

breaks his fast during Ramadan without a proper excuse, or kills another Muslim

unintentionally, or compares his wife with the back of a female within prohibited degrees

of relationship (which amounts to taking an oath not to have connubial relations with

her), or breaks a vow after having taken it, he has been enjoined to spend (compulsorily

in some cases, and voluntarily in others) some of his wealth over the needy and the poor.

This can be done in the form of cash, and also in the form of food or clothes. 68

c) Sadaqat-ul-Fitr:

Muslims have been taught and trained by the Holy Prophet (Peace and Blessings

be upon Him) in very unique way. At every step of their social life, their noble trainer (Peace and Blessings be upon Him) did not forget to remind them about their duty

towards poor, needy and deprived people in society. Sadaqat-ul-Fitr is one of the same

categories. It has been made compulsory for those whose possessions come up to a

65 Asqalani, p. 197. 66 Qurān, 9:60. 67 Shafi, p. 34. 68 Shafi, p. 34.

Pakistan Journal of Islamic Research Special Issue

certain specified quantity that on the occasion of the Eid-ul-Fitr they should, before going

to the prayers, distribute among the needy, the poor, orphans and widows, wheat or its

price at the rate of 1¾ seers per number of the family. Everyone has to pay this sum not

only on his or her own behalf, but even on behalf of one‟s minor children. To make such

charity obligatory this condition too is not necessary that the possessions which give rise

to the obligation should consist of objects of growth or should have been held for one complete year. So, the sphere of this obligation is even wider than that of Zakat, and it

can lead to the greatest possible demonstration of the principle of brotherhood,

particularly on the occasion of a collective festivity. 69

Narrated Ibn 'Umar, Allah's Messenger made compulsory – as the

Zakatul-Fitr - upon a slave, a freeman, a male and a female, the young

and the old among the Muslims [on breaking the fast of Ramadan] a Sa'

(about 2.5 kilograms) of dried dates, or a Sa' of barley. He ordered that

this should be distributed before the people went out to the ('Eidul-Fitr)

prayer. (Agreed upon]. Ibn 'Adi and Ad-Daraqutni reported [from Ibn

'Umar] through a weak chain of narrators: "Relieve them (the poor) of

the need to go around (begging) during this day (of 'Eidul-Fitr.) [by

distributing the Zakat-ul-Fitr on time)." 70

d) Nafaqat (Maintenance):

Islam has placed on everyone the responsibility of supporting his close relatives,

some of these relatives are such as must be supported in any case compulsorily, whether

one is well-to-do or poor, it does not matter and among such relatives are, for example,

one‟s wife and minor children. Then, there are other relatives who have to be supported

only if one possesses the means to do so. The Islamic law provides a long list of such

relatives. This injunction gives rise to a very fine arrangement for the maintenance of the

helpless and weak members of a family.71

e) Al-Waqf (Endowment):

Waqf means to make an endowment and to spend the income for public welfare,

while keeping the original property in self-custody or guardianship, not to be sold, inherited or given as a gift. It is not permitted to sell the Waqf. However a trustee is

allowed to take a mediocre maintenance allowance for his family, while drawing lavish

allowance is prohibited.

Narrated Ibn 'Umar', Umar got some land in Khaybar and went to the

Prophet (Peace and Blessings be upon Him) asking his command

regarding it and said, "O Allah's Messenger, I have acquired a land in

Khaybar which is the most valuable property that I have ever acquired."

He replied, "If you wish you may make the property an endowment and

give its produce as Sadaqa." So 'Umar gave the land as Sadaqa (in

endowment on the condition) that must not be sold, inherited, or given

away. And he gave its produce as Sadaqa to be devoted to the poor,

relatives, the emancipation of slaves, in Allah's Cause, for travelers and guests, and there is no sin upon the one who administers it if he eats

something from it in a reasonable manner or gives something to a

friend to eat, provided he does not store anything as goods (for

himself). [Agreed upon; the wording is Muslim's]. A narration by Al-

69 Ibid. 70 Asqalani, p. 200-201. 71 Shafi, p. 35.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

Bukhari has: "He gave the land in Sadaqa (as an endowment) that must

not be sold or gifted, but its produce must be spent (as Sadaqa)."72

Institution of Waqf has remained existed throughout Islamic history since its

inception till today a very popular tool to help poor and needy in Muslim societies.

Jurists have explained several aspects of such endowments. It was so popular among

companions of the Holy Prophet (Peace and Blessings be upon Him) that every one of them had made some endowments for specific purposes. Motivation for the Muslims to

make such endowments was the saying of their beloved Prophet (Peace and Blessings be

upon Him).

Narrated Abu Huraira: Allah's Messenger (Peace and

Blessings be upon Him) said, "When a son of Adam (i.e.

any human being) dies his deeds are discontinued, with

three exceptions: Sadaqa, whose benefit is continuous; or

knowledge from which benefit continues to be reaped; or

a righteous child who supplicates for him." [Reported by

Muslim].73

Normally beneficiaries of these endowments were the poor, needy, widows,

students, educational institution and Mosques where institutions of religious teaching were established. These were really flourished in Ottoman Empire and different Muslim

countries have specific ministries to look after the affairs of such endowments like in

Pakistan, Ministry of Religious Affairs and Interfaith Harmony is responsible for its

management. Different provinces have also established such ministries like for example

Auqaf and Religious Affairs department in Punjab.74

f) Right of Relatives in Wealth:

Islam has assigned permanent share of poor relatives in wealth of believers and made

it a compulsion by mentioning it in Holy Quran:

رت بذيرا ووالمسكينوابنالسبيلولت بذ وآتذاالقربىحقAnd render to the kindred their due rights, as ( also) to those in want,

and to the wayfarer: But squander not ( your wealth) in the manner of a spendthrift.75

To assign share of relatives in wealth of believers was a radical concept in Arabian

society where they were not giving inheritance rights to female members of family. This

concept was further strengthened by the Holy Prophet (Peace and Blessings be Upon

Him) through his several sayings for assisting poor relatives especially reward of charity

was declared double, if it would be extended to relatives as compared to strangers.

g) Fay’:

The Ummah started its existence under certain historical circumstances as it was

not only a religious community but a socio-economic body and a political community

too. Under the active leadership of Holy Prophet (Peace and Blessings be upon Him), it

sought to conquer new territories and occupy new agricultural lands in Arab peninsula. These lands were organized for the benefit of all. Total number of war expeditions which

72 Asqalani, p. 298-299. 73 Ibid. 74 https://www.punjab.gov.pk/auqaf_and_religious_affairs last accessed on 20-11-16 at 1:14 p.m. 75 Qurān, 17:26.

Pakistan Journal of Islamic Research Special Issue

Holy Prophet (Peace and Blessings be upon Him) led himself or sent against different

tribes was fifty-one. Only four of them are concerned with the theory of fay’ which was

against Banu Qaynuqa in 2 hijri, Banu Nadir in 4 hijri, Banu Qurayza in 5 hijri and

Khyber and Fadak in 7 hijri.76 Agricultural lands occupied as a result of these wars and

their treatment by the Holy Prophet (Peace and Blessings be upon Him) became

important precedent for Islamic state on which theoretical formulation of theory of fay’ was based by jurists.

The verses 6-10 of Sūra Al-Hashr are related to the rulings of Fay’. The term

fay’ (literally ruju of return of a thing) is derived from the word afaa which occurs in

Qurān. 77 These five fay’ verses can be categorized into two distinct parts: (i)

بيل وابن والمساكين واليتامى القربى ولذي وللرسول فللو القرى أىل من رسولو على اللو أفاء ما ل كي الس اللو إن اللو وات قوا فانت هوا عنو ن هاكم وما فخذوه الرسول آتاكم وما منكم الغنياء ب ين دولة يكون

. العقاب شديد

What Allah has bestowed on His Messenger (and taken away) from the

people of the townships,- belongs to Allah,- to His Messenger and to

kindred and orphans, the needy and the wayfarer; In order that it may not (merely) make a circuit between the wealthy among you. so take

what the Messenger assigns to you, and deny yourselves that which He

withholds from you. and fear Allah. for Allah is strict In punishment. 78

and (ii)

هم رسولو على لوال أفاء وما يشاء من على رسلو يسلط اللو ولكن ركاب ول خيل من عليو أوجفتم فما من

. قدير شيء كل على واللو

ون وأموالهم ديارىم من أخرجوا الذين المهاجرين للفقراء ورسولو اللو وينصرون ورضوانا اللو من فضل ي بت

. الصادقون ىم أولئك

ءوا والذين ار ت ب و يمان الد ا حاجة صدورىم في يجدون ول إليهم ىاجر من يحبون ق بلهم من وال أوتوا مم

. المفلحون ىم فأولئك ن فسو شح يوق ومن خصاصة بهم كان ولو أنفسهم على وي ؤثرون

خواننا لنا اغفر رب نا ي قولون ب عدىم من جاءوا والذين يمان سب قونا الذين ول للذين غل ق لوبنا في تجعل ول بال

. رحيم رءوف إنك رب نا آمنوا

What Allah has bestowed on His Messenger (and taken away) from

them - for This ye made no expedition with either cavalry or camelry:

but Allah gives power to His apostles over any He pleases: and Allah

has power over all things.

(Some part is due) to the indigent Muhajirs, those who were expelled

from their homes and their property, while seeking Grace from Allah and (His) good pleasure, and aiding Allah and His Messenger. such are

indeed the sincere ones:-

But those who before them, had homes (in Medina) and had adopted

the Faith, Show their affection to such As came to them for refuge, and

entertain no desire In their hearts for things given to the (latter), but

76 Ziaul Haque, Landlord and peasant in early Islam (Islamabad: Islamic Research Institute, 2012), p.118. 77 Qurān, 59:6-7. 78 Qurān, 59:7.

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

give them preference over themselves, Even though poverty was their

(own lot). and those saved from the covetousness of their own souls,-

They are the ones that achieve prosperity.

And those who came after them say: "Our Lord! forgive us, and Our

brethren who came before us into the Faith, and leave not, In Our

hearts, rancour (or sense of injury) against those who have believed. Our Lord! Thou art indeed full of kindness, Most Merciful." 79

Both parts belong to two different historical contexts but have more or less

similar message to convey: that fay’ or conquered lands belong to all Muslims. Pre-

Islamic concept of ghanima, according to which moveable booty was divided among the

conquerors, was radically transformed after the conquests of these lands and after the

Qurānic revelations on fay’. This category of ghanima, that is, lands are not to be divided

like movable chattles. The fay’ rightfully belongs to the poor who need it for their basic

necessities and subsistence so that they are also enabled to lead socially respectable lives

vis a vis those of the rich people who tend to augment their wealth by an exclusive

appropriation of this fay’. If this is understood in contrast with pre-Islamic social context

of Arabia this means that wealth must not be divided among the rich only as it was the

common practice of maldistribution in the ancient period, in which the chiefs of tribes had exclusive rights over booty because of their political and military hegemony. They

used to say that right of ownership belongs to mighty.80

The concept of fay’ originally envisaged four broad categories of recipients (of

fay’): 81

1. Allah (glory is to Him) and his messenger (Peace and Blessings be upon Him)

(i.e. Ummah in general), the kins, the orphans, the poor, and the way-farers (or

fighters) to check “the circulation of wealth only among the rich”.

2. The destitute Muhajrun who had left all their possessions behind in Makkah

after they had migrated to Medina, where they were putting up with Ansar.

3. The Ansar who were sharing their wealth with the Emigrants.

4. Those who came after them. This verse clearly refers to the people who are to come later and may mean the future generations, as Umar-I (RA) interpreted it.

This theory of fay’ developed gradually in Islamic jurisprudence from the

conquests of lands by the holy Prophet (Peace and Blessings be upon Him) to the

conquests of Iraq, Syria, Egypt and Persia in early caliphate. At this stage of its nascent

development the Ummah constituted the general principles of social solidarity, mutual

cooperation and egalitarianism as the elements of a vitally creative ethos. The general

interests of the Ummah in face of its formidable enemies tended to be overriding over the

interests of the individual members.82 Conclusion can be drawn that by introducing fay’,

Islam has clearly ensured non-concentration of wealth in few hands and took care of

needy and poor members of the community.

h) Land Reforms:

We are now discussing and elaborating, briefly, land reforms by the Holy Prophet (Peace and Blessings be upon Him). First of all is Ihya al-Mawat. It means

bringing of uncultivated and “dead” land to life. In the juristic terminology “bringing to

79 Qurān, 59:6, 8-10. 80 See, Tafseer of these verses by Tabari for detail. 81 Ziaul Haque, p.132. 82 Ibid., p. 143.

Pakistan Journal of Islamic Research Special Issue

life” means putting a piece of land to use by an individual and thus acquiring proprietary

rights over it.83

According to Imam Malik, the customary practice of Hijaz was that any

person who brought “dead” land (ard mayyita) to life became its owner. He ascribed this

policy to the Holy Prophet (Peace and Blessings be upon Him) and Umar-I.84 Obvious

purpose is to engage the community in agricultural activities so that food requirements

can be fulfilled and this was a motivational policy to achieve the said objective. This concept is very important and has been discussed and elaborated by jurists at great length.

Second important reform was the contracts of Muzāra„a and Musaqat.

According to jurists, mukhābara (or khibr)85 and muhāqala (or haql)86 were the pre-

Islamic forms of customary tenure which generally constituted a system of precarious

landholding. On the permissibility of tenancy practices jurists have two viewpoints based

on the hadiths of the Holy Prophet (Peace and Blessings be upon Him). According to one

viewpoint, Muzāra„a is absolutely invalid in Islamic law. The most prominent and cogent

representatives of this view point are the Iraqian jurist Abu Hanifa (d.150 hijri), and the

Syrian „Abd al-Rehman al-Awzai (d.157 hijri). Ibn Hazm (d. 456 hijri) barring his

modifications in the theory of Muzāra„a, belongs to this school of thought. Seven

different sayings of the Holy Prophet (Peace and blessings be upon Him) regarding

impermissibility have been mentioned in hadith literature.87

The second viewpoint to which majority of the jurists subscribes maintains that

lease of land against a certain part of its produce, against money, or in kind, is legal and

permissible. This stand point was opted by Malik ibn Anas (d. 179 hijri) and Al-Shafii (d.

204 hijri). Iraqian jurist Abu Thawr (d. 240 hijri) agreed to this opinion. Zia-ul-Haque has

mentioned seven different narrations regarding its permissibility. Even the student of

Imam Abu Hanifa, Imam Abū Yūsuf declared that musaqat and Muzāra„a are permissible

and valid contracts in Shariah on the basis of Prophet‟s deal of musaqat at khaybar

considering those hadith more authentic and common than those which are contrary to

those. He has considered these as Mudarabah because land of Muzāra„a and trees of

musaqat are just like the capital of mudarbah.88 It has been discussed at length that earlier

prohibition on Muzāra„a was in general interest of Muslim community in the beginning but with the passage of time, this prohibition became irrelevant and even harmful to the

83 Encyclopedia of Islam, 2nd ed., 1053. 84 Imam Malik bases his theory on two traditions, one from the Holy prophet (Peace and Blessings be upon Him), and the other from Umar-I (RA). According to him, Holy Prophet (Peace and Blessings be upon Him) has said, one who brings a „dead‟ land to cultivation becomes its owner, and for a person who unlawfully comes upon this land, ploughs it, develops and plants anything,

there is no legal right. This is a mursal hadith in all its narrations. The second tradition is that of Umar-I (RA) who says that one who brings a „dead‟ land to „life‟ becomes its owner. For details see, Ziaul Haque, p. 248. 85 It is a contract or bargain with a person to cultivate land for a certain part of its produce, or against a determinate share, like one third, one forth etc. For details see, Ziaul Haque, p. 19. 86 Ziaul Haque has given four definitions of muhaqala from Ibn Manzur and Majd al-Din ibn al-Athir: first, it is a transaction of grain still in the ear. Second, it is buying of grain in the ear in exchange of corn. Third, it is a contract of Muzāra„a stipulating a determinate share, that is, one

third, one fourth, or more or less. It is similar to Mukhābara. Fourth, it is lease of land against corn. The Iraqians call it Muzāra„a. 87 For detail see, Ziaul Haque, p. 19-40. 88 Ziaul Haque, p. 51-105

Financial Reforms for Social Development by Holy Prophet in Medinian Society (Peace and Blessings be upon Him)

general interests of Ummah. This is the reason due to which it was allowed and practiced

by the Holy Prophet (Peace and Blessings be upon Him) in Khaybar.89

Conclusion: Change brought by the Holy Prophet (Peace and Blessings be upon Him) to

mankind was so comprehensive that it has affected all spheres of human life. Financial

reforms in all three aspects are as important for today‟s modern society as these were for the Medinian society. These aspects are prohibitions, newly introduced reforms and

refined contracts and practices to bring them in harmony with injunctions of Shariah.

Since these were aimed to achieve both important and vital objectives of Islamic

economics mentioned by Holy Quran (i.e. circulation of wealth so that it cannot be

concentrated among rich community only and to ensure that there must not be any

financial exploitation in society), therefore; these are still as useful and beneficial for

modern societies and economies as these were for Medinian society. Prophetic

experience was a historical success to achieve social and economic development and

modern economies and societies can attain their sustainable social and economic

development by implementing same strategies on Prophetic footsteps.

89 Ibid., p. 87-106.