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    Model Answer Part A

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    peserta23 Hamid
    1. The concept of original permissibility means that transactions are permissible unless proven otherwise. This concept underlies the establishment of Islamic banking by removing prohibited elements like riba from conventional banking transactions. 2. For a contract to be valid in Islamic law, it cannot be originally prohibited and must be based on mutual consent. Gambling contracts are an example of something prohibited despite mutual consent. 3. The Prophet prohibited combining loan and sale contracts for two reasons - it could allow the lender to derive benefit from the loan, which is riba, and the lender may secretly increase profits on a sale as compensation for the loan, also constituting riba.

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    Model Answer Part A

    Uploaded by

    peserta23 Hamid
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    1. The concept of original permissibility means that transactions are permissible unless proven otherwise. This concept underlies the establishment of Islamic banking by removing prohibited elements like riba from conventional banking transactions. 2. For a contract to be valid in Islamic law, it cannot be originally prohibited and must be based on mutual consent. Gambling contracts are an example of something prohibited despite mutual consent. 3. The Prophet prohibited combining loan and sale contracts for two reasons - it could allow the lender to derive benefit from the loan, which is riba, and the lender may secretly increase profits on a sale as compensation for the loan, also constituting riba.

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    1. The concept of original permissibility means that transactions are permissible unless proven otherwise. This concept underlies the establishment of Islamic banking by removing prohibited elements like riba from conventional banking transactions. 2. For a contract to be valid in Islamic law, it cannot be originally prohibited and must be based on mutual consent. Gambling contracts are an example of something prohibited despite mutual consent. 3. The Prophet prohibited combining loan and sale contracts for two reasons - it could allow the lender to derive benefit from the loan, which is riba, and the lender may secretly increase profits on a sale as compensation for the loan, also constituting riba.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    51 views1 page

    Model Answer Part A

    Uploaded by

    peserta23 Hamid
    1. The concept of original permissibility means that transactions are permissible unless proven otherwise. This concept underlies the establishment of Islamic banking by removing prohibited elements like riba from conventional banking transactions. 2. For a contract to be valid in Islamic law, it cannot be originally prohibited and must be based on mutual consent. Gambling contracts are an example of something prohibited despite mutual consent. 3. The Prophet prohibited combining loan and sale contracts for two reasons - it could allow the lender to derive benefit from the loan, which is riba, and the lender may secretly increase profits on a sale as compensation for the loan, also constituting riba.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Islamic Banking and Finance

    Midterm Exams 2023

    Part A
    Answer Any TWO of the following questions:
    1. One of the principles of Islamic law of transaction is the concept of Original
    Permissibility (‫)االباحة االصلية‬. Analyse how this principle is being applied in the
    establishment of Islamic Banking and its operation.
    Key Answer: The concept of original permissibility means a transaction is
    originally permissible, i.e., not prohibited, unless it has been clearly declared as
    prohibited. So, as long as there is no prohibition, the default transaction is
    permissible. The default of banking operation is therefore permissibility, unless
    there is prohibited element in its transaction such as riba, gharar, gambling and
    other batil contracts which normally occur in the conventional banking
    transactions. When these prohibited elements are removed from banking
    operation, then the activities of banking are permissible. This is reason behind the
    establishment of Islamic banking, i.e., the removal of those prohibited elements.

    2. The basic transactional contract in Islamic law is based on the verse 29 of Surat
    al-Nisa’ (4) which says: “O you who believe, eat not up your properties
    among yourselves wrongfully (batil); unless it be by trade based on mutual
    consent (rida).” Explain the implication of this verse on validating the contracts
    in fiqh mu’amalat.
    Key Answer: There are two basic requirements for a contract to be valid: Firstly,
    the contract should not be originally prohibited (batil) such as gambling and riba,
    and secondly, the contract must be executed on the basis of mutual consent. The
    mutual consent alone will not validate the contract which is originally prohibited
    in fiqh mu’amalat. Gambling, for example, is not valid even though it is conducted
    with mutual consent among the gamblers. The hadith on the exchange of two units
    of good quality dates for three units of bad quality dates, despite being executed
    with the mutual consent, shows that such a contract is not approved by the
    Shariáh.

    3. The Prophet (p.b.u.h.) prohibited loan (qard or salaf) and sale (bay’) contracts
    to be joined together. Discuss by giving at least two different wisdoms (hikmah)
    for this prohibition.
    Key Answer: The wisdom of prohibition to combine loan and sale contract can be
    gauged from the spirit of prohibition of riba. One of the definitions of riba is that
    loan which derives benefit to the lender. In combining the loan with the sale, the
    possibility of deriving benefit from the loan is very visible in two situations. Firstly,
    when a lender offers a loan with a condition that the borrower must buy a
    merchandise from the lender, then the lender derives benefit in the form of the
    sold product. Secondly, in selling the product, the lender might increase the profit
    margin secretly as the compensation for his service of giving loan. In the two cases,
    loan combining with sale is tantamount to loan deriving benefit to the lender,
    hence it is riba.

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