07- Apr2021
Posted By: admin

Welcoming Ramadan with the Realization of SDGs through Islamic Finance

The Islamic social finance ecosystem – that includes Zakat (obligatory charity), Sadaqat (voluntary charity), Waqf (endowment), Qard al-Hasan (benevolent loan), Kafalah (guarantee), Takaful (co-operative insurance), and not-for-profit microfinance institutions in compliance with the principles of Islamic law (Shari’ah) – is well suited to support the United Nations’ Sustainable Development Goals (SDGs) in Pakistan, which are slated to be achieved by 2030. The SDGs fall under the Goals of Islamic law (Maqasid al-Shari’ah) that have been prescribed by the Almighty God, Allah (in the Holy Book – Qur’an) and explained by His Messenger, Prophet Muhammad (peace be upon him) (in his traditions – Sunnah/Hadith) more than 1400 years ago. As the Holy Month of Ramadan is upon us amidst the COVID-19 pandemic, the timing to engage in charity to reap the immense rewards couldn’t have been better. The Ramadan crescent is most likely to be visible on 13 April 2021, and the following day will hence be the first day of Ramadan in Pakistan, Inshaa’Allah (God willing).

Once again, we are faced with the cruelty of coronavirus that is disrupting our traditional ways of worship (Ibadah). Holding religious gatherings where Muslims break their fast (Iftar) together, spending consecutive days and nights (I’tikaf) during the last 10 days of Ramadan at mosques, and building a strong sense of community is at the heart of Islam. These practices are required to be eliminated to prevent further transmission of COVID-19 when the faithful, still reeling under the lingering pressure of an unrelenting pandemic, need them the most. The Ministry of Religious Affairs and Inter-faith Harmony said that mosques will remain open across the country to hold Taraweeh congregational prayers, as they were last year, but subject to the 20-point agreement between stakeholders (https://www.thenews.com.pk/latest/813195-ramadan-2021-mosques-in-pakistan-to-remain-open-for-taraweeh). There will be no Iftar, I’tikaf, and group Qur’an recitation sessions in mosques. Muslims will perform them in their respective houses with close relatives. But the broad dimensions of spirituality in Islam offer Muslims myriad ways to maintain that unspoken camaraderie while staying apart.

In addition to observing the ritual acts of praying and fasting, Ramadan is the month of Ibadah that encompasses increasing good deeds that includes giving Zakat (2.5% of a Muslim’s annual wealth exceeding the threshold) and Sadaqat with the sincere intention of pleasing Allah and earning His rewards and not out of show off to gain praise or recognition from others:

“O you who believe! Do not render vain your charity by reminders of your generosity or by injury, like him who spends his wealth to be seen by men and he does not believe in Allah nor in the last Day.”

(Qur’an, 2:264)

Zakat is one of the Five Pillars of Islam, occupying the second position, with prayer (Salat) being the first. Paying Zakat not only cleanses and purifies a Muslim’s wealth, but also their heart and soul from the delusions of human grandeur:

Take from their money a charity to cleanse them and purify them.

(Qur’an 9:103)

Zakat serves as a shield for Muslims against the evils of hedonism in this world and a path to achieving absolute success in the Hereafter (Akhirah). Its importance in Islam is so great that it is mentioned 82 times in the Qur’an in connection with prayer.

The obligatory nature of Zakat is firmly established in a Hadith narrated by Abu Dhar (may Allah be pleased with him):

“Once I went to him (the Prophet) and he said, ‘By Allah in Whose Hands my life is (or probably said, ‘By Allah, except Whom none has the right to be worshipped) whoever had camels or cows or sheep and did not pay their Zakat, those animals will be brought on the Day of Resurrection far bigger and fatter than before and they will tread him under their hooves, and will butt him with their horns, and (those animals will come in circle): When the last does its turn, the first will start again, and this punishment will go on till Allah has finished the judgments amongst the people.’”

In a similar manner, Sadaqat protects one from misfortunes and brings blessings in their life with increased sustenance (Rizq). Giving charity out of one’s wealth does not decrease it, rather Allah increases it as evident in the Qur’an:

Who is it that would loan Allah a goodly loan so He may multiply it for him many times over? And it is Allah who withholds and grants abundance, and to Him you will be returned,

(Qur’an, 2:245)

The likeness of those who spend for Allah’s sake is as the likeness of a grain of corn, it grows seven ears every single ear has a hundred grains, and Allah multiplies (increases the reward of) for whom He wills, and Allah is sufficient for His creatures’ needs, All-Knower).

(Qur’an, 2:261)

Those who (in charity) spend their goods by night and by day, in secret and in public have their reward with their Rabb (only God and Sustainer). On them shall be no fear nor shall they grieve.

(Qur’an, 2:274)

Allah will deprive usury of all blessings, but will give increase for deeds of charity: for He loves not creatures ungrateful and sinners.

(Qur’an, 2:276)

For Muslim men and women, for believing men and women for devout men and women for true men and women, for men and women who are patient and constant, for men and women who humble themselves, for men and women who give in charity, for men and women who fast, for men and women who guard their chastity, and for men and women who engage much in Allah’s remembrance for them has Allah prepared forgiveness and great reward.

(Qur’an, 33:35)

…that which you give for charity, seeking the Countenance of Allah, (will increase); it is those who will get a recompense multiplied.

(Qur’an, 30:39)

Sadaqat benefits the believer not only in this life but the next. The Prophet (PBUH) said:

“Sadaqat extinguishes sin as water extinguishes fire,” (Hadith, Tirmidhi)

He also said:

“The believer’s shade on the Day of Resurrection will be their charity,” (Hadith, Tirmidhi)

The Prophet (PBUH) would give charity throughout the year but increase his Sadaqat during Ramadan. Ibn Abbas (may Allah be pleased with him) said:

“The Prophet (PBUH) was the most generous of people, and he was most generous during Ramadan.” (Hadith, Bukhari)

Since the rewards for good deeds are multiplied during Ramadan, it is a good time to pay one’s Zakat if it is due and increase Sadaqat. In the face of the painful pandemic, participation of Muslims in giving Zakat and Sadaqat has become more important than ever.

We really don’t know anything about how the pandemic will continue to alter our lives. What we do know is that it has reversed the progress many households have made pre-pandemic and entrenched economic inequality on top of what was already there, pushing those who have chronically remained poor to further setbacks and deeper destitution, and that the effect could be long-lasting unless everyone comes together to contribute. As of 2015, 24.3% of Pakistanis are living below the poverty line (https://www.adb.org/countries/pakistan/poverty).

As the world grapples with controlling the novel coronavirus’ spread and coping with its crippling consequences and strives to restore global prosperity, it is now crucial to form strategic cross-sector alliances with different groups at local, regional, national, and global level that serve shared interests. This is essentially the point made in the UN’s Agenda 2030, which outlines the 17 SDGs (https://sdgs.un.org/goals). The response to the pandemic is inextricably linked to the Agenda.

The sustainable development programs that are carried out by non-governmental organizations (NGOs) have been promoted by Islam over 1400 years ago. The SDGs fall under the Goals of Islamic law (Maqasid al-Shari’ah). They are broadly discussed in five categories: protection and enrichment of (i) Faith (Deen), (ii) Self (Nafs), (iii) Intellect (Aql), (iv) Progeny (Nasl), and (v) Property (Maal). These are essentially what today’s international development sector refers to as sustainable development. The Islamic social finance tools – Zakat and Sadaqat, in particular – are highly aligned with the ethos of the SDGs. As such, the UN is stepping up its efforts to partner with players in Muslim aid to advance the use of Islamic finance.

Pakistan has a huge potential to transform the epidemic into an opportunity by working cooperatively and accelerate the actions required to address the underlying causes in the context of the SDGs. The spirit of solidarity during Ramadan, as well as taking effective and vigorous measures to combat the virus that we are enduring, must be brought to bear on achieving the Goals. In terms of its relationship with Islam, Pakistan is unique among Muslim countries: it is the only country that was established in the name of Islam following the injunctions laid out in the Qur’an and Sunnah and entertaining no other law that is incompatible with them (http://www.oxfordislamicstudies.com/article/opr/t236/e0616). It is the Islamic emphasis on giving that has deeply ingrained the spirit of generosity in Pakistani culture. According to a report published by the Stanford Social Innovation Review in 2018, more than 1% of Pakistan’s Gross Domestic Product (GDP) goes to charity, making it one of the most charitable nations in the world among “far wealthier countries like the United Kingdom (1.3%) and Canada (1.2%) and around twice what India gives relative to GDP.” (https://ssir.org/articles/entry/philanthropy_in_pakistan). Almost all Pakistanis (98% of the population) give charity in the form of paying cash, making in-kind donations, or volunteering their time to support needy causes (https://www.pcp.org.pk/uploads/nationalstudy.pdf) as Sadaqat is not limited to money. Last year when the country was under lockdown to battle a daunting coronavirus outbreak, many paid Zakat more than what was required of them (above 2.5%), while others, not eligible for Zakat, gave as much charity as they could (http://www.bbc.com/travel/story/20200331-the-law-of-generosity-combatting-coronavirus-in-pakistan). So there is hope. It may sound like a tired cliche, but we must not and cannot give up despite the challenges. We, Usmani & Co, welcome Muslims all over the world to embrace this Ramadan with honor and realize the wonders of the basic needs like food and water that we take for granted as there is so much more to be grateful for, while taking the merit of the blessed month to increase our righteous deeds through the act of giving charity in an effort to hand over support however possible – financially and/or materially – to alleviate the plight of those in need and to get our rewards multiplied manifold by Allah, the Most Generous.
Written by Ikhlas al-Amatullah

About Ikhlas al-Amatullah

Ikhlas al-Amatullah is a content writer at Usman & Co. After making several transitions in her tertiary studies to explore her career aspirations – obtaining Foundation Degree in Life Science from the University of New South Wales in Sydney, Australia and completing a year of Associate’s Degree in Finance from Kilgore College in Texas, United States, among others – she finally found her passion in Islamic finance. She graduated with a dual degree of Bachelor in Islamic Banking and Finance with the Dean’s Honor Roll from Asia Pacific University of Technology and Innovation (APU) in Kuala Lumpur, Malaysia, in collaboration with Staffordshire University in Staffordshire, England. At APU, she worked as a Research Assistant (RA) for the Former Dean of the Business School on projects related to FinTech and Internet of Things (IoT). She is now pursuing Master of Science in Islamic Finance at International Centre for Education in Islamic Finance (INCEIF) in Kuala Lumpur, Malaysia. At the Research Management Centre (RMC) of INCEIF, she worked further as an RA on governmental projects and ran the University’s Research Club for Islamic Finance (RCIF) as the President for a year.

Istijrar means purchasing goods time to time in different quantities
11- Feb2021
Posted By: admin


Istijrar means purchasing goods time to time in different quantities. In Islamic jurisprudence, Istjrar is an agreement where a buyer purchases something from time to time; each time there is no offer or acceptance or bargain. There is one master agreement where all the terms and conditions are finalized. There are two types of Istijrar:

  • Whereby the price is determined after all the transactions of purchase are complete.
  • Whereby the price is determined in advance, but the purchase is executed from time to time.

The first kind is relevant with the Islamic mode of financing. This kind is permissible with certain conditions.

  • 1. In the case where the seller discloses the price of goods at the time of each transaction; the sale becomes vaIid only when the buyer possesses the goods. The amount (price) is paid after all transactions have been completed.
  • 2. If the seller does not disclose every time to the buyer the price of the subject matter, but the contractors know that it is being sold at market value and the market value is specified and determined in such a manner that it does not vary and does do not lead to differences of the contractors, then the sale would be void.
  • 3. If at the time of possession, the price of the subject matter was unknown or the contractors agree that whatever the price shall be, the sale will be executed. However, if there is significant difference in the market price and the agreed price, it may cause conflict. In such a case, at the time of possession, the sale will not be valid, rather the sale will be valid at the time of settlement of the payment.

The validity will relate to the time of possession. Therefore, the ownership of the buyer in the subject matter will be proved from the time of possession.  After the payment of price, the buyer’s usage of the subject matter will be valid from the time of the possession.

Uses of Istijrar

The concept of Istijrar can be applied in Murabaha in the following manner:

The bank may use the concept of Istijrar for purchase of goods from suppliers and then to sell them based on lstijrar with some amount of profit on deferred payment basis. This product will work suitably when the bank purchases the goods directly from the supplier and then sells them to the buyer. As in this case, the goods will be in the ownership as well as in the risk of the bank till it sells them to the buyer, so that makes the contract of sale valid and earning profit on such a transaction will be permissible (Halal).

Conversely, if the bank appoints the buyer as its agent to procure the goods, and he purchases them from time to time and utilize them, then it would not be possible to ascertain the point at which the ownership and the risk of the goods passed to the buyer. To make an Istijrar a viable product, following mechanism may be used:

  • 1. The bank enters an lstijrar agreement with the purchaser to sell different commodities to the extent of some specified (say X amount) limit on a cost plus some profit basis.
  • 2. The purchaser sends a purchase requisition letter to request the purchase of specified commodities.
  • 3. Simultaneously or just after signing the Istijrar agreement with the purchaser, the bank agrees with the supplier either to purchase the goods on normal spot / credit payment basis or the bank may also enter a parallel Istijrar agreement to purchase the goods on market prices whereby, the payment may be made in advance or after the delivery.
  • 4. After receiving the purchase requisition from the customer, the bank sends a purchase requisition letter to the supplier to order him to deliver the goods to the bank or its authorized representative or ask him to deliver them to the purchaser's premises on bank's behalf. After taking possession of the good and making the supplier its agent to deliver the goods to the customer, the goods will remain in the ownership and risk of the bank.

It should be noted that a template purchase requisition letter should be prepared in such a way that it completely mentions the specifications of the goods. A confirmation letter should also be sent from the supplier to the bank and then from the bank to the purchaser describing all details of the goods and their prices, to avoid any ambiguity in the subject matter as well as in the price that may lead to any dispute.

By: Dr. Muhammad Imran Ashraf Usmani

An Eco-System of Shariah Compliant Investment
29- Dec2020
Posted By: admin

An Eco-System of Shariah Compliant Investment

The Knowledge of Halaal and Haraam with respect to one’s income is a matter of grave importance, highly emphasized in our Deen. The Prophet ﷺ stated that eating from haraam earnings is one of the things that prevent du‘aa’s and righteous deeds from being accepted.

Allah says in the Quran,

‘O you who have believed, eat from the good things which We have provided for you’

[Source: al-Baqarah 2:172].

In the explanation of the above verse, Prophet ﷺ mentioned a man who has travelled on a long journey and is disheveled and covered with dust; he stretches forth his hands to the heaven, (saying) “O Lord, O Lord”, but his food is haraam (from haraam earnings), his drink is haraam, his clothing is haraam, he grew up nourished from haraam earning, so how can his du’aa’ be accepted?”
[Source: Sahih Muslim].

Hence, we can safely conclude that an indifferent attitude towards this discipline can be detrimental for ones Duniya and Akhira.

Unfortunately, many Muslims around the world lack the opportunity to invest in corporations or equities in a Shariah Compliant way. Some countries do offer such opportunities via Islamic Banks, however, they do not adequately satisfy the Muslims in general due to their low returns and limited access to a few cities of those countries. By the grace of Allah, Pakistan has opened different opportunities for Non-Resident Pakistanis worldwide to invest their excess liquidity, cash, or savings to these types of investments which are completely Halaal, Alhamdulilah.

Overseas Pakistanis can enter Pakistan’s capital markets by opening a Roshan Digital Account(RDA) in any of the 8 eight designated banks. Under an RDA scheme 60,000 RD accounts have opened till now and over USD $200 million have inflowed in the country. Apart from many functional Islamic banks and mutual funds, Shariah conscious RDA customer can also freely trade shares by opening of Shariah Trading Account with Central Depository Company(CDC) and Meezan Bank partner brokers.

Pakistan Stock Exchange(PSX) also offers three indices: All Pakistan Islamic Index, KMI- 100, and KMI-30. PSX-KMI All Share Index, developed by PSX and Meezan Bank, comprises of all shariah-compliant companies listed on the PSX Ltd. The index enlists 226 companies with 24 additions and 24 expulsions made in 2019. Any Pakistani can invest in these companies and be confident in the fact that they are completely Shariah Compliant.

A recent Shariah compliant investment opportunity for Non-Resident Pakistanis is the Islamic Naya Pakistan Certificate (INPC). INPC is based on Mudarabah mode of finance. INPC company is a special purpose vehicle(SPV) owned by the Government of Pakistan that acts as Mudarib to invest and manage funds of NRP customers who invest as Rab-ul Maal. INPC company will invest these funds into Shariah compliant financing transactions with Ministry of Finance and Government of Pakistan. Islamic Naya Pakistan Certificate (INPC) till now has attracted USD $ 50 million of home remittance.

Instead of fixed profit rate INPC announces Profit Sharing Ratio (PSR) and Weightages before each month. Actual Profit earned from such investment activities during the month will be distributed among depositors as per profit sharing ratio (PSR) and weightages. Islamic Naya Pakistan certificate is approved by Meezan Bank and Shariah Advisory Committee of State Bank of Pakistan.

The rates of return on dollar denominated INPC are far higher than the non-resident Pakistani’s can earn in their host countries. These profit rates range between 5.5% to 11% depending on the maturity period of 3 months to 5 years. Table below highlights the profit rate in the month of November 2020.

Islamic NPC Company Limited
Islamic NPC Company Limited

A worth mentioning milestone is the establishment of the very first Digitalized Shariah Compliant Platform. Meezan Bank in collaboration with CDC and Brokers now allows investors through Meezan Roshan Digital Account-MRDA to trade through this platform. At this point of time 6 brokers are on Meezan Digitalized Platform to provide investment only in shariah compliant shares.

Many investors hesitate to invest in PSX directly as they do not understand Shari’ah processes. This platform reassures Shari’ah conscious investors, as Digitalized Trading System is inclusive of all Shariah principles.

An eco-system for the establishment of “Riba Free Pakistan” has already been provided for 8.5 million Non-Resident Pakistanis by the Government of Pakistan. From acquiring a digital account within 48 hours from anywhere in the world, a shariah compliant investor will have access to Capital Market, Real Estate, and investments in Islamic Naya Pakistan Certificate.

Quran Quran

“Those who eat Riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say: “Trading is only like Riba (usury),” whereas Allah has permitted trading and forbidden Riba (usury). So whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns [to Riba (usury)], such are the dwellers of the Fire – they will abide therein.” [ Al – Baqarah 275 ]

We at Usmani and Co. would urge all NRPs to explore these avenues further to help build a Riba free, progressive Pakistan.

By: Sadaf Sawant (Panel Member UCO)