Questions & Answers

The reason why the conventional Insurance products are considered as impermissible in Islam is on account of three factors:

1. Gharar (Uncertainty):
Conventional insurance involves uncertainty regarding the premium and the payout, which can lead to excessive ambiguity in contracts.

Ibn al-Qayyim (rahimahullah) defined it comprehensively, saying: "It is something whose occurrence is unknown, or whose reality and amount are unknown."

This happens a lot in conventional insurance in that premiums fluctuate, due to various factors which are based on market instability or change of regulations in a country etc., which results in benefits changing. These types of uncertainties renders contracts invalid.

Evidence: The Messenger of Allah (صلى الله عليه وسلم) forbade the sale of pebbles (using pebbles as a yardstick in transactions) and the sale of uncertainty. [Narrator: Abu Hurairah • Muslim, Sahih Muslim (1513)]

2. Riba (Interest):
Insurance companies often invest premiums in interest-bearing instruments, which are not permissible in Islam. There are also other forms of riba, related to input of the client versus the output by the insurance company.

Evidence: Riba is haram as expounded in Surah Al-Baqarah: verses 275-279

3. Maysir (Gambling):
Some aspects of insurance resemble gambling, as policyholders are betting on events that may or may not happen.

Evidence: Gambling is haram as mentioned in Surah Al-Baqarah: verse 219

Permissible Insurance - Takaful:
There are Islamic alternatives like Takaful, which is structured to comply with Shariah principles. Takaful is based on mutual assistance, shared responsibility, and cooperative risk-sharing, addressing the concerns present in conventional insurance.

A Takaful insurance product is thus based upon mutual cooperation and assistance among Muslims for helping the needy, poor, and those afflicted by disasters.

The reason why the conventional Insurance products are considered as impermissible in Islam is on account of three factors:

1. Gharar (Uncertainty):
Conventional insurance involves uncertainty regarding the premium and the payout, which can lead to excessive ambiguity in contracts.

Ibn al-Qayyim (rahimahullah) defined it comprehensively, saying: "It is something whose occurrence is unknown, or whose reality and amount are unknown."

This happens a lot in conventional insurance in that premiums fluctuate, due to various factors which are based on market instability or change of regulations in a country etc., which results in benefits changing. These types of uncertainties renders contracts invalid.

Evidence: The Messenger of Allah (صلى الله عليه وسلم) forbade the sale of pebbles (using pebbles as a yardstick in transactions) and the sale of uncertainty. [Narrator: Abu Hurairah • Muslim, Sahih Muslim (1513)]

2. Riba (Interest):
Insurance companies often invest premiums in interest-bearing instruments, which are not permissible in Islam. There are also other forms of riba, related to input of the client versus the output by the insurance company.

Evidence: Riba is haram as expounded in Surah Al-Baqarah: verses 275-279

3. Maysir (Gambling):
Some aspects of insurance resemble gambling, as policyholders are betting on events that may or may not happen.

Evidence: Gambling is haram as mentioned in Surah Al-Baqarah: verse 219

Permissible Insurance - Takaful:
There are Islamic alternatives like Takaful, which is structured to comply with Shariah principles. Takaful is based on mutual assistance, shared responsibility, and cooperative risk-sharing, addressing the concerns present in conventional insurance.

A Takaful insurance product is thus based upon mutual cooperation and assistance among Muslims for helping the needy, poor, and those afflicted by disasters.

Selling What You Don't Possess:
Firstly, it is not permissible to sell a product which you do not yet possess.

Proof: Sunan Abī Dāwūd (3503)
Narrated Ḥakīm ibn Ḥizām (RA): Ḥakīm asked the Prophet ﷺ: "O Messenger of Allah, a man comes to me and wants me to sell him something which is not in my possession. Should I buy it for him from the market?"
He replied: "Do not sell what you do not possess."

Deposit System (ʿArbūn):
As for working with a deposit system or taking a portion of the payment (such as a 50% non-refundable deposit), this will only be permissible on the condition that the seller owns the product and clearly states the conditions in the contract/agreement between the buyer and seller.

Conditions:
1. The seller must own the product in order to do such a transaction. If not, then it is the same as selling that which you do not own, which is not permissible.
2. It must be clearly stated in the contract or agreement that the deposit is part of the sale (this is known as ʿarbūn).
3. The buyer must grant you permission to use it. The contract must be transparent and free from gharar (uncertainty) or unjust enrichment.

If the deposit is given merely as a security trust without permission to use, then it is not permissible to use it until delivery or until explicit permission is granted.

Evidence:
Ibn Qudāmah (رحمه الله) in al-Mughnī (4/347) mentioned that Imām Aḥmad considered it permissible if the conditions are met.

Conclusion:
If the product is owned by the seller, the terms of the contract are transparent, and the buyer gives his consent by fully understanding the conditions without any gharar (uncertainty/excessive risk), then it is Islamically permissible to take a deposit (ʿarbūn).

As for the scenario mentioned of withholding 50% without owning the product, this will not be permissible.

Selling What You Don't Possess:
Firstly, it is not permissible to sell a product which you do not yet possess.

Proof: Sunan Abī Dāwūd (3503)
Narrated Ḥakīm ibn Ḥizām (RA): Ḥakīm asked the Prophet ﷺ: "O Messenger of Allah, a man comes to me and wants me to sell him something which is not in my possession. Should I buy it for him from the market?"
He replied: "Do not sell what you do not possess."

Deposit System (ʿArbūn):
As for working with a deposit system or taking a portion of the payment (such as a 50% non-refundable deposit), this will only be permissible on the condition that the seller owns the product and clearly states the conditions in the contract/agreement between the buyer and seller.

Conditions:
1. The seller must own the product in order to do such a transaction. If not, then it is the same as selling that which you do not own, which is not permissible.
2. It must be clearly stated in the contract or agreement that the deposit is part of the sale (this is known as ʿarbūn).
3. The buyer must grant you permission to use it. The contract must be transparent and free from gharar (uncertainty) or unjust enrichment.

If the deposit is given merely as a security trust without permission to use, then it is not permissible to use it until delivery or until explicit permission is granted.

Evidence:
Ibn Qudāmah (رحمه الله) in al-Mughnī (4/347) mentioned that Imām Aḥmad considered it permissible if the conditions are met.

Conclusion:
If the product is owned by the seller, the terms of the contract are transparent, and the buyer gives his consent by fully understanding the conditions without any gharar (uncertainty/excessive risk), then it is Islamically permissible to take a deposit (ʿarbūn).

As for the scenario mentioned of withholding 50% without owning the product, this will not be permissible.

Definition of Forex Trading:
Forex (Foreign Exchange) trading refers to buying and selling currencies to profit from exchange rate fluctuations.

While currency exchange (ṣarf) is permissible in Islam, modern online forex trading involves elements that make it ḥarām, such as:
- Riba (interest)
- Gharar (excessive uncertainty)
- Lack of hand-to-hand exchange (yadan bi-yad)

Riba in Forex Platforms:
Interest appears through swap or overnight fees. If the euro's interest rate is higher, the trader earns interest daily. If it's lower, he pays interest daily. This element of riba alone makes the trade impermissible.

Scholarly Statements on Forex Trading:

Shaykh Ṣāliḥ al-Fawzān (حفظه الله):
"This type of trading involves riba, gharar, and speculation. The trader does not actually possess the currency. Therefore, it is not allowed."

Shaykh ʿAbd al-ʿAzīz ibn Bāz (رحمه الله):
"It is permissible to exchange one currency for another only if the exchange happens immediately (hand to hand). If delayed or linked to interest or loans, it is not permissible."

Ruling on Online Gold Trading:
Scholars agree that online gold trading is not permissible because there is no immediate possession or exchange, which is required for ribāwī items like gold and silver.

Shaykh Ṣāliḥ al-Fawzān (حفظه الله):
"Trading gold through websites or forex platforms is not permissible. There is no real possession, and it involves delay and speculation. Such contracts fall under riba and gharar."

Conclusion:
Forex and online gold trading are impermissible (ḥarām) due to:
- Riba (interest): found in swap fees and delayed settlements
- Gharar (uncertainty): lack of real ownership and speculation
- Absence of hand-to-hand exchange (yadan bi-yad): a condition in ṣarf and ribāwī commodities

Muslims should avoid these forms of trading and seek permissible means of earning that are free from interest, uncertainty, and deception.

May Allah ﷻ grant us understanding of His religion and bless us with pure and lawful sustenance.

Definition of Forex Trading:
Forex (Foreign Exchange) trading refers to buying and selling currencies to profit from exchange rate fluctuations.

While currency exchange (ṣarf) is permissible in Islam, modern online forex trading involves elements that make it ḥarām, such as:
- Riba (interest)
- Gharar (excessive uncertainty)
- Lack of hand-to-hand exchange (yadan bi-yad)

Riba in Forex Platforms:
Interest appears through swap or overnight fees. If the euro's interest rate is higher, the trader earns interest daily. If it's lower, he pays interest daily. This element of riba alone makes the trade impermissible.

Scholarly Statements on Forex Trading:

Shaykh Ṣāliḥ al-Fawzān (حفظه الله):
"This type of trading involves riba, gharar, and speculation. The trader does not actually possess the currency. Therefore, it is not allowed."

Shaykh ʿAbd al-ʿAzīz ibn Bāz (رحمه الله):
"It is permissible to exchange one currency for another only if the exchange happens immediately (hand to hand). If delayed or linked to interest or loans, it is not permissible."

Ruling on Online Gold Trading:
Scholars agree that online gold trading is not permissible because there is no immediate possession or exchange, which is required for ribāwī items like gold and silver.

Shaykh Ṣāliḥ al-Fawzān (حفظه الله):
"Trading gold through websites or forex platforms is not permissible. There is no real possession, and it involves delay and speculation. Such contracts fall under riba and gharar."

Conclusion:
Forex and online gold trading are impermissible (ḥarām) due to:
- Riba (interest): found in swap fees and delayed settlements
- Gharar (uncertainty): lack of real ownership and speculation
- Absence of hand-to-hand exchange (yadan bi-yad): a condition in ṣarf and ribāwī commodities

Muslims should avoid these forms of trading and seek permissible means of earning that are free from interest, uncertainty, and deception.

May Allah ﷻ grant us understanding of His religion and bless us with pure and lawful sustenance.