AS-SALAAMU ALAIKUM, WA REHMATUL LAAHI WA BARAKAATUH,
Wait for adhaan
AUZO BIL LAAHI MIN ASH SHAYTAANIR RAJEEM,
BISMIL LAAHIR RAHMAANIR RAHIM
AL HAMDU LILLAAHI RABBIL ‘ALAMEEN. WAS SALAATU WAS SALAAMU ‘ALAA ASHRAFIL MURSALEEN. SAYIDINAA WA NABI YENAA WA MOULANAA MUHAMMADIN WA’ALA AALEHEE WA AS HAABEHEE WASALLIM.
All praise is due to Alláh, the Lord of all the Worlds; may the greetings and peace be upon the best messenger, Prophet Muhammad (SAW), and upon his family and upon all of his companions.
AL-HAMDU LILLA HIL LAZI HADAANA LIHAAZA WAMA KUNNA LANAHTADIYA LAW’LA ANN HADAANA ALLAH. (You must expand this Arabic portion of Khutbah, depending on the month/season, e.g. Hajj, Ramadaan, etc.)
Praise is due to Allah,
Praise is due to Allah who guided us to the righteous path, and indeed we wouldn’t have attained this state of guidance without Him Allah,
English Part of the Khutbah:
IKHWATI FIL ISLAM, ASH-HAAB AL ILM, WA RUWAAD AL ILM, Brothers in Islam, Learned Colleagues and Scholars,
A while ago, we did a Khutbah on the topic of Riba coupled with Islamic Finance and we agreed that as this was a vast topic it will be done in 2 Phases.
We also said that as most authors cover the present day situations so in contrast in the 1st Khutbah we looked at the Historical background and in particular, the cause, the root and answered why these ayats on Riba were revealed in the first place.
As promised, in this final Khutbah we will look at the future of the Islamic Finance; where its heading and why. So in the short time we have today, we can only focus on a few essential points.
The purpose of todays Khutba is to highlight the real problem with the Islamic finance industry in that despite a 50-year history and current assets of about $300bn (£153bn) they have yet to add any value. Islamic banks have not created any new jobs (employment at Islamic banks does not count), financed new inventions or innovations or made the Islamic communities more just and equitable. The smoke and mirrors Islamic finance industry appears to be all about creating financial structures to comply with the letter of the law, not the spirit and intent of the Quran.
Historically speaking, lets go back to the first principles and work our way back to present day’s dilemma.
“The Qur’an condemns Riba, and Commentators describe a pre-Islamic practice of extending delay to debtors in return for an increase in the principal (Riba al-jahiliyya). Since this practice is recorded as existing at the time of the revelation, it is one certain instance of what the Qur’an prohibits. Hence H. Ibn Hanbal (RA), declared that this practice – ‘pay or increase’ – is the only form of Riba the prohibition of which is beyond any doubt.”
However, gradually, based on hadith, the scope of Riba was widened and two types were identified: Riba al-fadl (primarily related to sales transactions), and Riba al-nasiya (sales or debt involving deferment), where the latter corresponded to Riba al-Jahiliyyah. H. Ibn Abbas (RA), one of the major companions of the Prophet Muhammad (SAW) and earliest of the Islamic jurists, and few other companions such as H. Usama ibn Zayd (RA) , H. Abdullah ibn Mas’ud (RA), H. Urwa ibn Zubayr (RA) , Zayd ibn Arqam (RA) considered that the only unlawful Riba is Riba al-jahiliyyah.”
It is broadly agreed that the Qur’an does not define Riba as one type of transaction or another. … The efforts of the fuqaha or judicial scholars like Shaikh Zuhayli and the examples of the hadith allow us to determine a clear idea of what is Riba.”
Anyhow, these prohibitions have created a fundamentally different vision of finance from the west: namely, money is supposed to act as a store of value for tangible trade or business, and investors and institutions should share risk.
This implies that most modern bank accounts, bonds, derivatives and loan structures are banned. In recent years, bankers have devised structures to meet shariat, often by using equity-style schemes, rather than simple debt. Islamic bonds, or “sukuk”, are thriving, as is “takaful” insurance. Also, shariat compliant bank accounts and more recently, hedge funds have sought ways around the rules.
I am not saying I agree with any of this but giving you a picture of the current state of affairs.
Even H. Umar Ibn Al Khattab (RA) said “There are three things. If Rasoolallah (SAW) had explained them clearly, it would have been dearer to me than the world and what it contains: (These are) kalala, Riba, and khilafa. Incidentally, this hadith has been taken from Ibn Majah, the Book of Inheritance, Vol. 4, #2727. Incidentally, the term kalala here means leaving no parents or children as heirs and it occurs twice in the Qur’an, and like Riba wide divergences exist regarding its interpretation among scholars.
Now let us look at the Financial Products of Islamic Banking. So what are they?
The most commonly used are those with reference to wadi’ah (safekeeping), mudharabah (profit sharing), murabahah (cost plus), ijarah (leasing), qardh al-hassan (benevolent loan), and musharakah (joint venture).
The Wadi’ah (safekeeping of funds) is of two categories: The first category is the current account which, as in conventional banking, gives no return to depositors.
The mudharabah represents investment accounts which are based on unrestricted contract. These accounts are term deposits that cannot be withdrawn prior to maturity without a penalty. A bank acting as an agent under a mudharabah contract is referred to a mudharib. For a project, e.g., a factory, which yields an identifiable rate of return, the government would issue a Mudharabah certificate to investors. This instrument is equity-based and hence marketable in secondary markets, with the secondary market price determined by the performance prospect of the underlying project.
Murabahah means a sale of an item on mutually agreed profit. Technically, it is a contract of sale in which the seller declared his cost and profit. Islamic banks have adopted this as a mode of financing. As a financing technique, it involved a request by the client to the bank to purchase certain goods for him. The bank does that for a definite profit over the cost, calculated either on a percentage of cost basis or as a fixed amount. This vehicle is used mostly to assist short-term trade transactions.
Ijara, also known as ijara waqtina (lease and purchase), is a leasing contract whereby a party leases an asset for a specified rent and term. The owner of the asset (the bank) bears all risks associated with ownership. The asset can be sold at a negotiated market price, effectively resulting in the sale of the ijara contract. The ijara contract can be structured as a lease-purchase contract whereby each lease payment includes a portion of the agreed asset price and can be made for a term covering the asset’s expected life. Such contracts are also common in real estate transactions in the United States.(8). This system is disadvantageous for the buyer, who is unable to refinance a property he lives in at more favourable terms because it is registered in the name of the bank. Such a restriction if applied to the U.S. real estate market would have enormously negative economic consequences for the entire real estate sector.
Qardh al-hassan (Benevolent Loan) – is a loan extended on a goodwill basis, wherein the debtor is required to repay only the amount borrowed. However, the debtor may, at his discretion, pay an extra amount beyond the principal amount of the loan (without promising it) as a token of appreciation to the creditor. Muslims consider this type of loan to be the only type that does not violate the prohibition on Riba because none is promised or paid.
Now lets say a few words on Musharakah (Joint Venture) and the rising of Sukuk.
Musharakah is a form of an equity participation contract under which a bank and its client contribute jointly to finance a project. It is done through the issuance of “Participation Securities,” commonly referred to as sukuk or Islamic bonds. The sukuk is becoming so lucrative that many banks are rushing to set up shari’a-compliant operation. With abundant oil-windfall revenues and with many mega infrastructure projects which are either underway or on the drawing board, the Gulf is fast becoming the logical choice of new and established players alike to set up shop.
Moody’s, the credit ratings agency, estimates total takaful (Insurance) premiums were worth more than $2bn in 2005 and predicts this will rise to $7bn by 2015, mostly concentrated in the Middle East and Malaysia. Mercer Oliver Wyman, the consultancy, estimates takaful insurance premiums are expanding at 30% a year.
As the Shariat dictates prohibits interest all financing must be done on a profit and loss sharing basis. In spite of all the lofty rhetoric, in practice no more than 5 per cent of Islamic financing is done this way.
Instead, Islamic banks use a structure called murabaha, or cost plus pre-determined profit, for the vast majority of their finance deals. Remarkably, the “profit” for an Islamic bank in a murabaha transaction and the interest a conventional bank would have charged on the same transaction happen to be exactly the same. Indeed, Islamic banks in determining their “profit” even quote the rate as a margin over Libor or other similar indices.
Murabaha was a crude trading practice designed for transactions between real sellers and real buyers involving physical goods. By structuring a financing transaction while disguising it as a trading transaction – and charging interest concealed in Islamic garb – Islamic banks turn the entire enterprise into a charade.
Other modes of financing are just as dubious. Take Islamic house finance, structured as a lease: lease payments are equal to interest that a conventional bank would charge on a home mortgage loan. Sukuks, or Islamic bonds, are similar in many respects to murabaha and just as tainted. Brandishing a fatwa from a scholar of sharia law (who, like mercenaries, are sometimes for sale at the right price), blessing the structure does not absolve the bankers from the responsibility of meeting the spirit of the sharia.
Islamic banks need to move away from the deceptive modes of financing they currently use and step towards the American style of venture capital. This has two advantages. First, the stated principles of Islamic banking – favouring profit and loss sharing over interest – are very similar to the financing techniques used by the venture capital industry, especially in the US. These private equity groups are the real Islamic finance, the genuine article. Second, by providing funds to entrepreneurs with bright ideas, the banks can assist in promoting innovation, invention and creation of new jobs and industries.
The ironic thing is that although the US is not an “Islamic country”, more authentic and genuine sharia compliant financing is done in the US than in all the Islamic countries combined. That is because American venture capital groups annually provide about $25bn in capital financing to entrepreneurs, scientists and engineers with new ideas. As a consequence of the availability of this type of financing the venture capital industry in the US has given birth and nurtured scores of Silicon Valley companies, including modern day icons such as HP, Cisco, Intel, Sun Micro Systems, Apple, Netscape, Ebay, and Google. All were created in the past 30 years or so from ideas grounded in science and technology. Scientists and engineers came up with the ideas, innovations and inventions while the venture capital industry provided the capital on a partnership basis. Millions of new jobs have been created as a result.
Sharia-compliant consumer banking has long thrived in some Muslim countries, with services provided by local banks. Now, some of the world’s biggest institutions are responding to a growing demand from Muslim consumers.
When UBS, the Swiss bank, sold $750m worth of Islam-compliant bonds for Khazanah Nasional Berhad, the Malaysian government’s investment arm, it was assumed that Muslim investors had bought most of the bonds.
Not so. Non-Islamic investors also scrambled to purchase the issue, which was the largest convertible bond issued in Asia in 2006.
The tale highlights a broader pattern in global finance. Until a couple of years ago, Islamic finance was a specialist niche of international banking, limited to Muslim countries and focused on the retail sector. But it has expanded rapidly, with estimates of its size ranging from $250bn to $750bn.
Malaysia may be the model for countries taking their first steps in developing a market for Islam compliant financial products but it now appears to be lagging behind more conservative states.
The country has been building up its Islamic banks for more than 20 years and, at a size of about M$117bn (US$33.4bn), they now represent a 12 per cent share of its banking market.
At one time – from AD750 to about AD1100 – it was the Muslim world that was making advances in science and technology, because of the availability of risk capital (from rich people or sponsorship from the rulers) and respect for education, scholarship, discovery and innovation. But nothing of consequence has been invented in the Islamic world for hundreds of years.
The west’s renaissance partly came as a result of learning from the Islamic world. Now it is the Islamic world that needs to learn from the west, especially borrowing those ideas that are both consistent with its own beliefs and able to contribute to economic and scientific development. Venture capital is clearly such an idea. By becoming more like venture capital groups, the Islamic banks can practice real Islamic finance while helping the Islamic community to rediscover its tradition of invention and innovation.
Conclusion of the First Part of the Khutbah:
NAD’OO ALLAHA AN YAGHFIRA LANA ZUNUBANA
Meaning: We make Duas to ASWT, so that he will accept all our Ibadat & forgive our sins.
WA AAKHERO DAA’ WAANA ANIL HAMDO LIL LAAHEY RABBIL AALAMEEN
Sit down & make a du’a yourself.
Globally Standardized Conclusion:
AL HAMDU LILLAAHI NAHMADUHU WANAS TA’EENAHU, WANASTAGH-FIRUHU, WANATOOBU ILAYHI, WANA’OOTHU BILLAAHI MIN SHUROORI AN-FUSINAA, WAMIN SAYYI AATI AA’MAALINAA.
MAY- YAHDILLAAHU FA HUWAL MUHTAD, WA MAY- YUDLILL FALAN TAJIDAA LAHU WALIYAN MURSHIDA. WA ASH-HADU AN LAA ILAAHA IL LAL-LAÁH, WAHDAHOO LAA SHAREEKA LAH, WA ASH-HADU ANNA MUHAMMADAN ‘ABDUHOO WARASOOLUH
All Praise is due to Alláh, We praise Him and we seek help from Him. We ask forgiveness from Him. We repent to Him; and we seek refuge in Him from our own evils and our own bad deeds.
Anyone who is guided by Alláh, he is indeed guided; and anyone who has been left astray, will find no one to guide him.
I bear witness that there is no god but Alláh, the Only One without any partner; and I bear witness that Prophet Muhammad (SAW), is His servant, and His messenger.
YA AY-YUHAL-LATHEENA ‘AAMANUT TAQUL-LAAHA, HAQQA TUQAATIHEE WALA TAMU TUN-NA, IL-LA WA ANTUM MUSLIMOON.”
O You who believe, – Fear Allah, as He should be feared, and die not except as Muslims.
YA AY-YUHAL-LATHEENA ‘AAMANUT TAQUL-LAAHA, WA QOOLOO QAWLAN SADEEDAA. YUSLIH-LAKUM A’MAALAKUM WA YAGHFIR LAKUM THUNOOBAKUM, WAMAY YU-TIL-LAAHA WARASOOLAH, FAQAD FAAZA FAWZAN ATHEEMAA.”
O You who believe, – Be aware of Allah, and speak a straightforward word. He will forgive your sins and repair your deeds. And whoever takes Allah and His prophet (SAW) as a guide, has already achieved a mighty victory.
INNALLAAHA WA MALAAIKATAHU YUSALLÚNA ALAN NABI. YAA AY YOHAL LATHEENA AAMANU SALLÚ ALAYHI WASALLI MÚ TAS LEEMA.
ALLAHUMMA SALLI ALAA MUHAMMAD, WA AALA AALI MUHAMMAD, KAMAA SALLAYTAA ALA IBRAHIMA, WA AALA AALI IBRAHIM. ALLAHUMMA BAARIK ALA MUHAMMAD, WA AALA AALI MUHAMMAD, KAMA BAARAKTAA ALA IBRAHIM, WA AALA ALI IBRAHIM, INNAKA HAMEEDUN MAJEED.”
Behold, Allah and his angels shower blessings on the Prophet (SAW). O you who believe! Ask for blessings on him, and salute him with a worthy greeting.
The Du’a – before the Khutbah Ends:
Again, for the sake of global standardization using the global “Islamic Language”, one uses a standard and brief du’a:
ALLAHUMMAGH FIR LIL’ MUSLIMEENA WAL MUSLIMAAT…. Stop for the congregation to say AAMEEN
WAL MOAMINEENA WAL MOUMINAAT…STOP FOR AAMEEN
AL-AHYAA’EE MINHUM WAL AMWAAT…STOP FOR AAMEEN
INNAKAA SAMEE’UN MUJIBUD DA’WAAT… STOP FOR AAMEEN
Ya Allah, forgive all our Muslim men and women,
Forgive the believing men and women,
Those who are alive and those who died,
You are indeed the One who listens and accepts all supplications.
RABBANA LAA TUZIGH QULOOBANAA, BA’DA ITH HADAY TANAA WAHAB LANAA MILLA DUNKA RAHMA. INNAKAA ANTAL WAH-HAAB.
O Allah, do not let our hearts deviate from the Truth now that we have been guided , but grant us Mercy from Your very Presence, for You are the Grantor of bounties without measure.
RABBI JA’ALNI MUQEEMUS SALAATI, WAMIN DUR-RIY-YATI, RABBANAA WATA QABBAL DU’AAH.
My Lord, help me to perfect my salaat, and of my descendants, Our Lord, accept this dua.
RABBIGH FIRLEE WALI WAALI DAYYA, WALIL MU’MINEENA YAWMA YAQOOMUL HISAAB.
My Lord, forgive me, and my parents, and all Believers until the Day of Reckoning.
SUB’ HAANAKA RABBEKA RABBIL ‘IZZATI ‘AMMAA YUSIFOON, WA SALAAMUN ‘ALAL MURSALEEN, WAL HAMDU LIL-LAAHI RABBIL AALAMEEN.”
Glory to Allah, Lord of Majesty and Honour, and Peace on the Prophets, and Praise to Allah, Lord of all creation!
Other Duas you could make:
Ya Allah, accept our Ibadat and forgive us.
Ya Rabb, have mercy on us. Help us obey you and praise you.
Ya Allah, we stand before you having observed all the tenets of Islam, so lead us to prosperity and growth, to triumph and solidarity, to unity and wealth beyond our imagination.
Ya Allah, we beg for your MAGFIRATAK, and ask you for success, health and wealth for all the brothers who are present here and now in this blessed room.
Ya Rabb, increase our love that binds us together now, and in the future to come.
With regards to their dear beloved ones who have passed away, Ya Rabb, may you grant them a place in Jannatul Firdaus. May you forgive all their KHATAYAA, KABEERA WA SAGHEERAH. May you fill their Qabr with your holy noor. Ya Rabb, may you also save us from ADHAAB AL QABR. Ya Allah, grant their rooh, eternal peace, AR RAAHA AL ABDIYYAA on the YAWM AL HISAAB.
Ya Allah, accept all our duas, fulfil all our righteous wishes, fulfil our dreams,.
Ya Allah, may your rehma and safety encompass all our families, wherever they may be.
Ya Allah, grant these brothers who are present, here and now, SABR that is YUHIB HUM AS SABR.
Ya Allah, make the Prophet Muhammad (SAW) intercede or YASHFAAH on our behalf on YAWM A QIYAAMAH.
Globally Standardized Conclusion:
IBAA DAL LAAH:
IN NAL LAAHA YA’A MURU BIL ADLI WAL IHSAN
WA EE TA’EE ZIL QURBAA WA YANHAA ANIL FAHSHAA’EE WAL MUNKAREE WAL BAGH’YI
YA EE ZUKUM LA AL LAKUM TAZAK KAROON.
FAZ KU ROONI AZ KUR KUM WAS KU RU LI WA LA TAK FURUN.
Then you conclude by saying to the mu’azzin:
WA AA QIMUS SALAAH