Ruling on Mortgages & ‘Shariah Compliant’ Loans for Homes | Ask Shaykh YQ #71 with Dr. Hatem El Haj

[Music] so we are well aware that one of the biggest issues of consternation of controversy between the american muslim community frankly the western muslim community is the issue of purchasing a house and the mechanisms for doing so whether one is allowed to avail oneself to the conventional mortgages or whether it is permissible to go to the islamic bankings or is it even islamic these particular banking systems that are out there the various enterprises that are giving these islamic mortgages are they truly islamic and halal or not and i've been bombarded as all of the students of knowledge and scholars have been for so long and have been delaying giving a full and detailed response and today insha'allah we will begin uh with a very deep and intensive dialogue and i have uh with me joining me today uh somebody whom i consider to be not just a friend but a mentor and that is dr hatim alhaj dr hatim al-hajj before i i ask him to speak i have to introduce him uh and i'm sorry to be a little bit praising here so maybe dr hadim you can put some uh some ear plugs on inshaallah ta'ala but i consider dr hatim and hajj to be one of the margiers one of the the sources of islamic law and fatawa in this country and on a personal note when i myself i'm wondering about something i want to bounce ideas off of somebody when i don't really know myself which direction to go about a filter issue or something then the first person that i text is actually dr hatim alhaj and of course dr hatim alhaj isn't just a shaykh or an alim he's also board certified in the pediatric in pediatrics by the american board of pedia pediatrics so he's a practicing doctor as well he has a phd in comparative from lebanon from jinan university and he's also done an m.a in sharia from the american open university and he's a professor assistant professor uh in this uh department of uh the college of islamic studies at mishka university and of course he's also one of the pillars of amja the american muslim jurist association and so i welcome dr hatim alhaj as for the introduction i i don't deserve it and it is you know out of your humbleness i could love hayden but you know i i just wanted to say that i don't deserve it uh so although we would have fruitful discussion today this is a very complicated issue and i will not buy it uh also my reluctance to talk about this subject because it's uh and i i know of so many slaughters throughout the muslim world that are extremely reluctant to talk about this subject uh because as you are well aware it's very complicated um the distance between uh the reality and what we aspire to seems to be uh like large and we're trying as much as we can we're trying not to be cynical uh but we're trying also not to be naive and that balance is very hard to strike so may allah guide our tongues and our hearts uh so uh you know one of the the reasons i'll be honest that i've been very hesitant to speak about this issue and anybody who's asked me you know for the last few years i keep on saying inshallah release something soon is that i feel that this is a very sensitive topic and anybody who gives a fatwa is going to have to bear the responsibility of that fatwa and it is something that i've been very uh cautious about as usual for saying this is a very very big issue it's not a trivial matter and one is just cognizant of the difficulties as you said between balancing between the needs of the muslim community and between the great sin of interest and it's not a very easy and delicate balance so i completely share with you the the sentiment of uh the seriousness of this matter and ask allah to guide all of us to that which is pleasing and to forgive any mistake that we might make so before we jump into the issue of mortgages and whatnot do you have any overall uh comment about the modern field of islamic finance i know it is one of your specialties so overall what would do do you have anything you'd like to say about the the new field of islamic finance well the name itself islamic finance i guess if we're talking about providing funds for business ventures then yes islam islamic finance would not be oxymoronic in the in this case because uh we have the moda rabbah which is profit sharing we have a different part kinds of partnership like like full rain partnership and other types of partnership that were meant to provide funds for business ventures but when it comes to providing funds for a purchase of an item for use or consumption like a house a car etc uh then the i the name itself the tension within the name is quite obvious uh because providing funds for someone to purchase a an item an object for use for consumption uh is a in islam is a benevolent uh act uh it's called the part of the hassan it's a goodly loan and uh it the no profit is expected to be made out of this uh but nowadays uh it is not uh possible basically to fulfill the needs of all the people uh because of how the world has become because the expectations and the needs and i i don't want to be harsh on the people also and make it all about expectations or extravagance there there are needs uh that need to be fulfilled and we live within a financial system a global financial system that is insensitive to an inconsiderate of our values not because they have to not because there is conspiracy or not because they're like just like evil and they they want uh basically to oppose our values but because they they just not don't share our values uh and uh we don't have the size of islamic finance [Music] you know in 2010 uh it was worth about 1.3 trillion dollars that may sound like a big number but it is actually not that big uh i heard that this is half of what a conventional bank you know one of the largest conventional banks would would be worth uh just one bank so the idea here is we are islamic finance is trying basically to instrumentalize some of the old uh contracts that we had in a completely new environment and within a a global financial system that is not particularly accommodating of uh of our laws for our values so that's that's the difficulty um and you know we ask allah to uh to to make it easy for the people who embark on this task embark on the task of uh [Music] you know adapting uh these contracts to uh modern finance mean so uh for our viewers again just a very um you know brief uh uh basic point of is that in our sharia giving somebody a loan is never meant to generate profit in fact in the authentic hadith in the sunnah our prophet sallallahu alaihi wasallam said that whoever gives somebody alone shall get half of that money as a reward of giving sadaqa so if you gave 10 000 loan and you got 10 thousand back allah will reward you five thousand as if you gave sadaqa to somebody so this is the purpose is that in islamic sharia in giving somebody that's why it's called a good loan it's a loan from the heart you give somebody something that is a genuine good deed you expect allah to reward you obviously the modern notion of capitalism of the entire globe of finance it is not based on this principle and so islamic finance specifically and really islamic economics modern islamic economics it's actually a fascinating field and you know as the shaykh said we really should feel sympathetic for the people involved they're trying to make the best of a very very different paradigm the sharia and his paradigm is so different than the modern notions of the bank and of giving you serious loans and of course muslims all of us are connected to the modern world we cannot live in an isolated bubble so we have to make the best of a very difficult situation uh so with that uh um why don't i ask you uh uh uh the the setting up the entire stage here is that can you explain to us uh the islamic notion of riba and very briefly is the western notion of interest the same or different than the islamic notion of riba okay from the la well the th you know uh interest is more general than riba in a sense and ripa is more general than interest in a sense so riba linguistically means increase and in islam there are like three different types of reba so we have ribbon asia which is deferment and we have rebelliad which is exchange the ribbon of exchange and i may you know uh clarify what this means and then we have rebel foot which is that above increase or you may say that we have like rebel which is the ribba of loans and rebel which is the liberal of sales rebel peru is basically when you give a loan and you expect a a a return on this loan like a profit to be made [Music] when you are paid back uh that is basically a rebel peru it is increase of uh the uh increase that is uh a a result of the deferment of uh of the payment and in in reba elbio it's it's completely different and that's why the concept of reba is much larger than simply interest because interest will accrue on the loan due to the deferment that is rebel nasia or rip of deferment but then we have the the concept of rebel which is river of in sales and river in saves the results from uh exchanging two items that are usurious items they were mentioned in one hadith the hadith silver wheat barley dates and salt he mentioned six items and uh he said the foreign you know these items when when gold is paid for by gold uh silver for silver um wheat for wheat barley for barley dates for dates and salt for salt has to be like for like equal for equal and if you know uh and and if there are of different kinds then uh you could sit you could sell as much as you want like with an increase in the amount as long as it is hand to hand or immediate exchange and then whoever offers an increase or asks for an increase has committed reba now so so we have two different types here of ribba that are basically implied in this hadith one of them is rebel which is increased so when you trade for instance wheat for wheat it has to be like for like equal for equal hand to hand when you treat wheat for barley it does not have to be equal for equal but it has to be hand to hand immediate exchange when you treat well when you trade i'm sorry when you trade uh gold for silver or silver for uh gold uh they don't have to be equal for equal but they have to be handed hand to hand and then uh gold and wheat they don't have to be either so there could be deferment there could be increase because they belong to two different groups so reba in that sense is is a very complicated matter it is not only uh interests that accrues on alone because of the deferment which is the common uh form of ribba that comes to mind when riba is mentioned but there is a whole genre of rebel buyer or river of sales that that is divided into two types fab which is increase and exchange which is so reba is uh much more general than interest but uh in a sense when people talk about interest uh when when we uh when when people translate reba to usury usually also as as a problematic translation because usually uh is exorbitant interest reba is not only exorbitant interest reba is any interest but any interest that accrues on a loan any interest that accrues on a loan but if i say to you if you ask uh if if you ask me for my laptop and i sell you my laptop uh for like this say five hundred dollars and you say i don't have the money um can we defer the payment until next month and then i tell you okay if you will pay me next month or if you will pay me installments over three or four or six months then it is not five hundred dollars i will sell you the laptop for seven hundred dollars to be paid over six months is that interest well some people could say that i added the interest but now i this is a commodity for price and i am not basically this is not a loan this is a save so can i add the uh time value to the price in a sale yes can i calculate if i if i calculate this uh uh you know on the basis of some formula uh in my mind let us say seven percent you know at a rate of seven percent and i i even tell you how i calculated it that is called the interest but that is not haram that is not ribbon i am selling you in my laptop and i am adding the time value not in a loan transaction but in a sale transaction as long as we agree on one final version of the contract certainly we cannot keep it open-ended where i tell you the price is 500 now with a seven percent interest so if you pay over one year it is this or two years it's not like if we finalize the contract and we have one form of contract now uh the laptop would be for 700 over six months uh regardless of how i arrived at this uh number and regardless of whether i will tell you how i arrived or not this is a permissible transaction and it is not usurious so uh to continue it for uh basically what can be said here is that riba the islamic term is broader generally speaking than the western notion of interest because of a debt and in our sharia there is a hadith it is a weak hadith but the concept is is there it is reported that the processor said that it is a weak hadith is most likely similar of a companion that could look every single loan that generates any type of any type of benefit it is considered to be ribba so when you stipulate in a loan that you're going to get a benefit from that loan the majority of our scholars would consider that to be a type of riba therefore the interest that you know we people in this in this part of the world charge when they give a loan uh that is definitely a type of ribba by the explicit text of the hadith and before i move on as well i'd like to point out that there is no question that riba is one of the major sins in our religion allah azza explicitly mentions in the quran that whoever takes riba it is as if he is declaring war against allah and his messenger that having been said we need to be a little bit careful and accurate there is a genre of hadith that seems to equate uh ribba with arudhu and these are hadith it is true that some of our later scholars consider them to be hassan but the reality is that the majority of our scholars including the the ones that are really more reputable in this field uh ibn al-qayyim ibn al-jazi and his modul they all said that any of these narrations that seem to link uh the sins of riba with doing zina with one of your mahrams all of this is from the the basically the the storytellers it's not from the prophet sallallahu alaihi we don't need that genre of hadith we have enough to tell us that riba is a very very major sin the next question shaykh is that if you look at the text of the quran allah azzawajal always criticizes those that are eating riba and in some of the madhavs as you are aware there is this distinction made between the sin of uh charging interest versus the sin of paying interest and so some madhhabs and some scholars they differentiate and they say that the sin of charging is more than the sin of having being forced to pay as well in the hadith in sahih muslim and others that our prophet said that the one who gives it and the one who takes it and the one who witnesses and the the one who writes the contract they're all the same so what is uh how do we understand this is the sin of charging interest always the same as the sin of being forced to to pay it i also can care with you on the uh genre of a haditha talk about that uh actually not only equate riba to zenna but make reba worse than 36 acts of zina or you know making zenna with once uh mother uh i used to actually uh i i uh used to sort of uh accept the the the one of the one version of of these hadith because of the authentication of shuffle albani but then i had i had a lot of difficulty justifying the the hadith the meaning of the hadith myself and i just was forcing myself to accept it and has tried to figure out using sort of like all my like my sort of augmented capacity to justify it somehow but then as you said most of the scholars most of the iridite hadith scholars have considered the whole genre of a hadith in this regard week not traceable to the prophet sallallahu alaihi then you have the hadith of [Music] devours river or consumer and the one who feeds them and the one who takes it gives it and the one who takes it and the two scribes or the two witnesses and the scribe and he said that they are equal uh i i believe that you know i believe in the position of the scholars who said that they are equal in uh being partners in crime in a sense so that had they not all done this like had you know they not helped each other doing this that gra the crime needed all of those uh sort of uh members um but uh that is why they are equal because they uh their participation in this crime was needed for the crime to be uh committed uh some of the scholars also said they are equal in the sense that they are equal in so they are equal in in in being sinful not in the magnitude of the sin so in other words they're they're all sinful that's what the prophet salallahu meant to say not equally sinful in the sense of the magnitude of the sin itself some would say that sometimes the prophet salallahu will talk about the reward of you know if you believe that this is also an authentic tradition if you the the word of saying in the masjid after salat for instance until the sun rises and then you pray to raqqa so you have the reward of a complete and and so it is a little bit difficult you know that like because there is so much that you do and we know the rewards so some people may say that it is to encourage people and some people may say that now we will take it as the prophet said but in there is so much more you do than the basically so ultimately it is not going to be the same and certainly the exploiter and the exploited if the exploitation of people is one of the major idlers or the major causes of the prohibition of ribba or wisdoms of the prohibition of reba you cannot hold equal the exploiter and exploited uh there's got to be a difference in sin precisely precisely i remember when you were speaking it reminded me uh something that i heard from arushaika mean said to us in one of his lessons he he complained of the and this is back in the 90s um he complained of the rising trend of vahi of vahrehvahism of a literalism that you just take a hadith and you don't really understand the fir behind it and he decried this new trend that was you know arising in that time frame and as you pointed out this hadith uh generally speaking pretty much you know the majority of the they have understood it in a manner as you correctly pointed out that there is no way that the one who charges interest and wanting to increase his wealth there is no way that the sin of that person is going to be the same technically as the sin of the one who is you know in a very difficult situation in dire circumstances or even in a haraju not necessarily that we're going to come to and he's kind of you know forced because of the the lifestyle or the pressures of the world that he's living in to you know give an amount of interest they cannot be the same based upon many other principles of the sharia so we don't just find one hadith and then use it to trump all the verses and all of the other hadith rather we form a narrative that takes everything into account and the fact that for example the quran always criticizes those who eat riba and also that we have other hadith notions of this nature so it is definitely you know safe to say that a person who might be forced to give riba because of certain circumstances may allah you know protect and forgive all of us that there is no way that that sin would be if it is even a sin would be anywhere near the sin of the one who is willingly for no reason other than greed charging riba on a loan that he gives somebody so the next question that i have for you is that as you're aware there are some voices in our times that claim that the conventional mortgage the standard mortgage that is practica that is you know uh people avail themselves to in america that it does not constitute a type of islamic ribba and they have their reasons for saying so that the bank owns it it doesn't give an actual uh that it's not an actual ribba loan and they have the reasons for for saying so uh what is your position is a mortgage an example of islamic riba uh the mortgage is certainly an example of islamic reba uh uh what what happens in a conventional mortgage is that the the bank gives you uh uh the money uh to purchase the house and gets back more over time that's exactly you know that's ribba uh there is no uh merchandise here at all that the bank acquires and sells to you uh it is basically exchanging money for money uh with deferment and exchange for an increase or a profit on the investor return on the investment so that's that's ribba from the islamic perspective and i am aware of the scholars who are trying to say that basically you know because you have it it is not one group of scholars saying the same thing you have different groups and some of them uh are saying that you know uh to deposit money in the bank is not tribal because the bad the the banking system is so advanced and they have their own calculations and they invest this money and because they are capable of forecasting the profit that they will make they can tell you exactly how much profit you'll be making and so on and so forth but there is another group of scholars who are actually trying to go back all the way and deconstruct uh the notion of reba in modern times particularly after nixon and nixon unlinked uh the currency the american currency which is the massachusetts in the world from the gold reserve and abandoned the gold standard which started from the time of roosevelt but was completed by nixon when it started during the great depression and now the currency is unlinked uh to the gold reserve so some of the scholars are saying you know what uh proof do you have that uh basically uh the dollars and sterling pounds and euros are usually uh items um are you liking them to gold and silver why are you liking them the gold and silver and then we start to get into technicalities and there are three different you know even when it comes to islamic financing even what comes when you're trying to provide an islamic product there is a uh a genuine uh genuine solutions genuine alternatives uh that are philosophically different and ideologically different from the congenital conventional products and there are technical differences you're trying to provide a product that is technically different but functionally the same or you're basically not even trying to provide a product that's technically different but you are trying to rhetorically uh basically convince the masses that your product is actually uh sharia compliant without it even being technically different uh from uh the the the products that we have on the market or the conventional products uh the the same we can say about the scholars that are trying to basically say that there is no ribba anymore uh unless unless it is gold for gold uh but there is basically anymore and in this case you could say well the you know the ella of reba or the cause behind uh the prohibition and of exchanging gold for gold and gold for silver and so on and so forth is that they are measured by weight and that would be the hanafi and hanvari position um but but according to the manikins in jaffa is the the the the reason behind uh you know the prohibition of reba and gold and silver is that they are currencies as as men if here here the problem here is that if you actually uh say well i'm hanafiore hambetti and i believe that the reason behind the prohibition is weight then we will be circumventing the objectives of sharia with technicalities technique you know and the technicality here is not simply sly maneuvering or deceptive legal devices you're actually talking about two mazab out of four but it's still a technicality because if you look at it functionally philosophically then we will not have rib anymore and then we will create problems for zakat as well exactly if you are not you're going to be saying that dollars and pounds and euros and reals and so on cannot be likened to uh to gold and silver then you're not gonna only uh we're not gonna only have problems in in the chapters of ribba but we will also be having a lot of problems in zakat as well precisely so we are in full agreement then that those small minority of voices with utmost respect to them who claim that mortgages are simply not even an example of riba that they really don't seem to be coming from a solid background and we both agree that the conventional mortgage is in fact a type of riba now let's now get to the the the juicy stuff here we agree that the mortgage uh loan is a type of riba loan the question arises under what circumstances would this be permissible we are all aware that for the last 30 years or more there has been an ongoing debate amongst our scholarly class one side of which allows a conventional mortgage with a list of reasonable conditions it must be the house that you live in you cannot afford you know the alternatives meaning you cannot just purchase the house by cash uh you don't do this for business and of course you have some very very well respected jurists you know the sheikh of course the most famous example but it's not just him i mean the european council professor fredo and research in 1999 by a large majority if not unanimous i forgot they voted uh they also gave a fatwa in this regard uh the number of scholars that say that a conventional mortgage just straight up from the bank if you're living in the west and in your middle class basically you're not a millionaire you can't just afford it by one check or so what not that they say that it is a type of of a need not a type of necessity but a type of need and they have their illness without getting into the the reasons and the causes because again that's a bit too advanced for our um you know a conversation here but just without getting into all of the details of why they're saying this what is your frank assessment your own personal opinion that is it permissible for the muslim living in the west to obtain a conventional mortgage and also what is your advice to the lay muslim when he sees you know shaykh away and these great urlama on one side and then on the other side also greater so part a and part b if you want to follow well the party is is easy because um i would have to say two things you know i am a member of amgen at hamza we you know our position on this issue is clear that uh conventional mortgage is not permissible except in the case of larora and not had except in the case and so um you know the the scholars of the european council they they felt that there is a hajja and they felt that there is like a hijab and they uh basically allowed uh conventional mortgage but they allowed it if there is no islamic alternative and since we have somewhat uh you know an islamic alternative now then we all are in agreement that you should first seek the islamic alternative that that is available for people in the us and in europe as well uh so that at the time they allowed this there was no islamic alternative um and they i i do remember that they clearly stated that as long as there is no islamic alternative then it would be allowable for people to uh to obtain a conventional mortgage i would say that let us basically say that this will should be addressed on one by one basis the the person who does not have access to an islamic mortgage and feels that he has some type of he needs to ask a scholar about this and then go buy uh their fat wood as for part b uh you know you know that the the um it's it's a complex it's a complicated question i would just say that the the two important pieces of advice here are one um imam shafi'i said admiral muslim woman is the muslims unanimously agreed that to whomever the sunnah has become clear it is not permissible for them to leave it for the statement of any scholar now can all muslims in certain cases things could be clear in many cases you may not be able to discern uh you may not be able to understand the rationale behind the thought was of the scholars but when it is clear to you that the intent of allah and his messenger is to prohibit or to allow something then the statement of a scholar will not save you if it if you feel in your heart that you're quite confident that this is what allah and his messenger had wanted of you the second thing is the hadith of this which is safety callback uh i consult your heart righteousness is that with which you feel comfortable or the heart feels tranquil and the soul feels comfortable and it's more sin is what wavers in your chest and causes discomfort in your breast um regardless of how many fat was or you regardless of how many times the people have given you their legal counsel or their fatwa so that having said this uh if it is if your heart feels uncomfortable then i would tell you uh listen to your heart and i would i would say in general i would say in general one should try as much as they can to exercise water uh you know consciousness screw philosophy religious scrupulosity or being cautious being careful uh but when there is a particular you know issue that causes you hardship when as there is a particular matter a particular issue that causes your hardship and you got two different uh opinions from two different scholars one is easier and one is more difficult and it is not clear to you what allah what allah wanted of you on this particular respect uh and your you know there you just can't understand the the rationale behind the two thought was it is okay to take the easier one it is not saying that you're going to be doing this all the time you're going to be scanning the old effect yeah you know in the world and picking out all the easier fatal but i'm saying that if you come across or encounter a matter that is causing you hardship and different fatah you hear different fatal and some are easier and some are harder it is okay in this case uh to take the easier front so to summarize then uh that uh the position of uh shekhar bawi and the european council we respect it and it is coming from a legitimate paradigm we are not dismissing it at all it is a legitimate fatwa however i think the both of us are in a very similar wavelength that we don't endorse that fatwa unconditionally rather only if there is no alternative and if the person's circumstances are specifically in a pretty difficult situation perhaps in that particular exceptional scenario but as a default as a norm uh the both of us are very hesitant to open this door uh shayana i want to add here though one of my dear mentors as well and um i mentioned his name because his youtube clip went viral uh tens of thousands maybe hundreds of thousands of people saw it a few months ago he released a short video about mortgages dr akram edu i'm sure you're aware of him in a great adam and sheikh and he said that when it comes to food and drink the haram will never become halal unless it is the life and death however he said when it comes to finances and financial matters he says generally speaking the haram becomes not at the level of the but at the level of hajja or a general need now for our viewers in islamic law matters are divided into you're going to die food water drink air hajja it's something that makes life you know livable if you don't have it you're not going to die but it just makes life very difficult and then tahsenia it is of course something that makes life luxurious and nice but you don't even need it and his point was that for example insurance for example car insurance it's not darura but it is a hajja you could get by you're not going to die if you don't have car insurance but it's a hajja and he gave other examples from the economic field as well and then he said that most of our scholars understand this when it comes to most of the transactions that there's a hajja and so they'll overlook yet when it comes to mortgages he says that the hajja might even be even more so for example you want to have a house in the district that your children go to school to and it's a good school or you want to get a house that is close to the masjid or you want to get a house that is close to your parents for example that is a bigger hajj than many of the other transactional hajjat that many of our scholars allow uh you know they they allow certain concessions for so he was very clear in this regard and he of course endorsed the european council of fatwa that the default ruling for them would be that the average muslim in the west would be allowed to take a mortgage because he said it is a hajja and because of hajjat are allowed to be you're allowed some laxity when it comes to financial issues your your comments and thoughts about this it it is very complicated and uh certainly i respect the chef acromendado a great deal the secret scholar i i just wanted to say that they're not all equal you know they're not created equal different sins are different when it comes to insurance uh [Music] insurance is basically prohibited because of a rather and which is speculation honduras thinking due to uncertainty and ambiguity is a genre of sins or uh sort of muhammad prohibited transactions the whole genre of these forever transactions there are many exceptions in the sharia where farah has been allowed by the sharia some degree of valor has been allowed by the sharia some degree of hara has been allowed by the sharia for like needs for for various needs but when it comes to ribba in particular are not the same so that is why generally speaking if if we're talking about the foreign uh or we're talking about a sort of clauses in the contract that are not compliant then certainly hada and varura they both will they will both be operative here in making concessions in making concessions but when it comes to the clear cut ribba you know when it comes to ribbon asia the the agreed upon ribba the clear katriba uh is then this is where we say that it is only the not the hajja uh that will allow concessions having said that we you know i understand that there is like a you know uh that someone can argue about someone can also say that uh ribba uh is not prohibited uh in and of itself it is privately because of what what it leads to uh as um to evil not that it is even in and of itself but it is a means to evil and why are you creating that difference between riba and the butter someone can also say that the prophet salallahu allowed some degree of which is basically to exchange dried dates for ripe dates on the palm trees and certainly there are different kinds of rubber combined in this transit but he allowed it for a hija not the rural the hajj people wanted to eat fresh dates i mean they have the dried dates it's not like they're going high but they wanted to eat fresh dates so he recognized their need for fresh states and he allowed this so i understand that there is like it is it is not completely cut and dry but uh but what what we're trying to say is that there has been uh a um like close to a consensus of the contemporary muslim scholars that reba is a category that is higher in prohibition i mean it's quite obvious that the prohibition of all of the africa about ripa are quite obvious so they are saying that this is a category that is different from hara or undo risk taking that's why they happen a lot more permissive in things like insurance than they were in clear katriba so allah knows this and you can make an argument uh but uh as is clear you respectfully disagree because of a very uh very technical point which is actually not that technical it's just uh it is that the the gravity of the sin of riba is a totally different uh caliber if you like then the other issues that the sharia might have overlooked when it comes to other financial matters so because of this uh you are not comfortable opening the door and that's a very valid paradigm i want to also say if you don't mind i just wanted to say that many of the scholars are saying this because of a a different concept like there is another layer of complexity here which is the public need and that is why some scholars are being more permissive and it imagine in the book of reason uh he he talks about this and he talks about you know let us say you know that that you know means so lively would become so difficult halal means livelihood becomes so rare and scarce and difficult that haram prevails on earth and then he said something that is very interesting he said that you know it is not far-fetched to say that this is the case in our times in his century uh then it is not possible for us it is not possible for us it is not possible for us to demand of people to uh basically refrain from sustenance or to abstain from sustaining themselves and uh you know clothing themselves and so on and so forth and then he continued and this this is like you know he continued to talk about different examples where it will not be only for the rora but for hajj where the concessions will be made not only for the rat but for hajjat and he mentions that if the muslims limit themselves during those times if the muslims limit themselves to that that will debilitate the ummah as a as an ummah so that is also another uh reason why uh i do not condemn the other fatal i just disagree with without condemnation because i do understand that there are different uh you know takes on on this matter and i respect all the scholars and their takes as long as they uh use proper usually again i'd like to underscore this point tani what uh dr hatham said especially for our viewers is that all too often we find some of our students may allah azzawajal you know guide them and grant them more wisdom they are so over zealous in their remarks about great ulama that they disagree with and they don't understand that in fact those they're also are solid they wouldn't be i mean if they had so that are completely whacked out or far left field they're coming from a solid paradigm and actually you know if you listen to dr hatton carefully subhanallah what a generous spirit of dr hadimi actually gave more arguments even though he doesn't agree with it right and he's saying i see where they're coming from so this is the spirit that i wish all of us have is that utmost respect i respectfully uh disagree with their fatah they have the paradigm correct they have the usual valid but it is a gray area and they are prioritizing certain things we are prioritizing other things so alhamdulillah we're exactly on the same wavelength here we have three questions left but these are the and the now so now we've spoken about general mortgages let us get to the issue of the uh islamic mortgages that is the conventional name that is given to them and before i ask you the question let me set it up for our audience and viewers a brief summary is warranted here that uh the islamic companies that offer uh sharia compliant loans basically i'm calling it an islamic mortgage because that's some of the terms that is used but it's called the sharia compliant loan there are a number of models that these companies use three of them are the most famous they're not the only but these are the most the most utilized the first of them uh is called the muraba with the promise to pay and what that is is that the the company buys the house and then sells you the house back in installments for a profit okay so this is the murab with the promise to pay this is the first model that is used the second model which is perhaps the most common in north america and that is that's a diminishing partnership that eventually ends with you owning the property and in the second model the uh the islamic company purchases the house along with you you are both owning the house and you enter into a partnership and the the the the uh percentage of ownership slowly diminishes as you keep on paying the monthly installment and you pay the same amount but a portion of that goes back to the loan and a portion of that goes to the rent and the proportion of loan versus rent it continues to change as the years go on until finally you have paid off the entire loan and the rent and then the house is yours so this is called the diminishing partnership model and then the third model which is used by one or two companies here in north america and that is the ijara rent to own and that is when the islamic company the the sharia compliant quote unquote company that it will ask you to get a conventional loan and then it'll purchase the house off of the bank and then resell it to you in installments along with a rental agreement so these are the three main conceptual mechanisms number one mora baja with the promise to buy number two is the diminishing partnership and number three the ijara rent to own for now the question i want to ask you dr hatim let's leave aside the real contracts that exist with these companies let's talk conceptually speaking if we could have an ideal uh contract that is muraba how would promise to buy number one number two the diminishing partnership and number three ejada rent to own what is your personal verdict conceptually speaking for an ideal contract in all of these three categories bismillah well the ideal contract would be because it will be easy uh you know it the the for the problem with the muraba the idea contract is if the islamic mortgage company has all the resources it needs or all the funds it needs uh to yeah you know for for all the muslims and all the people their customers without needing to go to the secondary market and sell those contracts you know that the problem with muraba is uh means cost the plus sale it is when you uh when it is called as you said it is basically cost plus sale uh to the purchase order i go and order you to purchase a property for me and you add your markup and sell it back to me after you possess it you add your backup and send it back to me for a larger sum of money over many years so it's a simple uh simple contract a simple contract that once we have ensured that you actually bought and possessed the property you could turn around and sell it to me uh for a markup that you uh decide then what i will owe you is a debt now you gave me three hundred thousand dollars uh and you give like many other people the you know five hundred thousand eight hundred thousand and so on and so forth you ran out of money unless you can take this contract and sell it in the secondary market to freddie mac uh fannie mae afraid democracy somebody uh you will not have funds to to to give to any more clients then if you are if you're a muslim you have a problem at your hand here because it's you can't sell debts the sale of debts is impermissible in islam so is not doable if we're talking about muslim companies and we do want to patronize muslim companies and we don't want to support them and so on because of this reason unless they have enough funds for everybody which you know i don't know if anyone has uh so that is the the diminishing partnership the the problem with diminishing partnership is that it is complicated because you will continue to be a partner for 30 years and you have to live up to what that means you know you are a partner so you have to live up to the requirements of partnership and the rules of partnership in islamic law and that makes it complicated to get out of all of this you will need to have many clauses in your contract that will be not compliant or at least that you will have to put a lot of effort and so much patchwork to get them to comply it will be pretty difficult uh to get all the class to comply the same applies to the rental one the same advice surrender one you will be the lessor and i will be the lassie but as the financier you are the lassor and you are the lessor for how long for 30 years so you have to live up to the rules of hijara in islamic law and that is also difficult because you will have to be responsible for periodical you know or they call it as i say like the same applies to the diminishing partnership in proportion proportion to your uh uh assets uh but but the idea here is it is also problematic now you cannot if those uh contracts uh bear all this risk you cannot take them and sell them in the secondary market to freddie mac and fannie mae so in order for you to be able to do this you will have to eliminate the risk as much as you can as much as you need to to be able to sell them in the secondary market and that elimination of risk goes against the sort of the rules in the sharia so there are complications in all three the kinds of contracts uh unless you have the political will and the economic capacity not only the political will because we are part even in a muslim country in a muslim majority country we're part of the global financial system and it is hard without so much political will and economic power both you know both of them it is hard to have products that are truly compliant in essence that are functionally islamic technically islamic and in every way islamic uh so so that's that's the difficulty the the encounter so again to to to summarize then what uh what you're saying is that ideally speaking the muraba would be the best all three of them in an ideal world if we had the finances and if we had you know the the wherewithal you could construct an islamically permissible contract no problems but we get to the crux of the matter and that is realistically it is simply not viable for any uh corporation for any entity to uh manage many hundreds if not thousands you know of properties and sell them to so many muslim clientele without getting involved in certain conditions certain clauses that are highly problematic and this is where of course the problem comes and that is that conceptually speaking these three models uh yes ideally it's possible to be 100 halal but realistically we know that when these corporations when these uh sharia compliant uh they call them social compliant companies when they ask you to sign their 30-40 pages of documents there are so many specific clauses in there that are highly problematic and questionable and as you pointed out dr dr hattim they seem to be very unfairly prejudiced against the buyer and in favor of the company whether it is distribution of maintenance costs whether it is taxes whether it is even late fees which is another issue and so let's now get to the the crux of the matter here we understand these contracts do have problematic clauses even if ideally the model might theoretically be halal do you think these problematic clauses invalidate the permissibility of the contract i know that's a broad-ended question so feel free to elaborate and give uh you know give the caveats over here well let me let me say this um the idea here is that the the old contracts that we have that are established in the sharia you cannot really instrumentalize them in our modern times uh to provide islamic modes of financing you will have to have new contracts each and every scholar recognizes that these are new contracts no matter how much we give them islamic names or names of established islamic contracts or transactions these are new contracts they're not the old ones and many scholars and you know and and that is uh and most of the muslim countries they they they uh they take the photo of him that new contracts can be uh analyzed that that you could have new contracts you don't have to you you don't have to use established contracts in islamic uh fec uh but you could make new contracts as long as those new contracts are not in conflict with their principles with the islamic objectives and the principles of uh you know islamic transactions so we we do understand that these are new contracts now these new contracts in order for them to be hanal they need to meet certain guidelines so in order for them to be halal and to provide a a functionally a different alternative an alternative that is more equitable an alternative that will basically make islamic finance shine and show you know the transparency the accountability the equity the social responsibility those are the characteristics of islamic finance however islamic finance in our times even in muslim majority countries does not have that good a reputation you know why because of different reasons one because of the difficulties of creating uh instruments like financial instruments within the global financial system that are compliant because the global financial system is expectedly not really considerate of our values and our laws the second one is that banks do want to eliminate the risk whether because they want to eliminate the risk to be able to sell their contracts in a secondary market or they just want to eliminate the risks because they want to eliminate the risk even majority countries so there is a large distance between you know what you know what we aspire for and the reality uh a large distance or the coast plus uh for the purchase order the problems with this uh there are so many problems in this that that caused you know this to be um you know not completely like compliant in its current forms one is basically the mutual binding promise it is not the promise from by one entity it is promised from both entities which scholars consider it akin to a contract although there are some differences and i don't know how technically you wanted this to be but like if if we want to make it not too technical then we we're saying let's just mention you know the the major problems one of the major problems is the mutual binding promise uh which is in which is uh too many scholars akin to a contract i promise to buy you know i tell you buy this for me and then i give you a binding contract to buy it from you for a biting promise to buy it from you and uh that binding promise some people said it's the malicky position many matakis would argue that it is not maliki's do not even accept you know the the muraba concept to begin with the maliki's many malaki's many contemporary mataki scholars would consider the binding promise in these transactions to not be uh that the proper maliki position and uh you know the mata keys uh like as sheffield fariani for instance wrote extensively on this issue uh chef salute of libya now this is just one of the problems and we're talking about a binding promise from one side we're not talking about a binding promise from both sides which is even more problematic but that is what happens uh there you have a binding promise from both sides and then what is also uh unclear is whether the the bank possesses the property or the institution the financing institution or the bank possesses the property before they turn around and hand it over or or pass it on to you that position is important is necessary for this transaction to be halal because the prophet salallahu which means that profit is tied to liability if you do not become liable for the property you know money does not beget money there has to be some risk there has to be some labor there has to be some reason to make profit otherwise money should not be get money so the bank or the institution should own the property and then sell it to you does this happen you know one institution wrote to uh the office of the controller the office of the controller of currency and explained to them the mura baja type contract to convince them that there is no difference between it and between the murabaha contract and conventional mortgage and to convince them because you know banks should not be involved in risky ventures risky investments so the office of the controller of currency would not allow them to basically be involved in a risky uh investment or transaction so the bottom line is the office of the controller of currency told them that you have that this is functionally light completely similar to a conventional mortgage and it is okay it is fine because they have eliminated the risk to a point where you cannot you could not recognize any functional difference functionally not technical because the contract may be technically but you cannot recognize any functional difference between it and the conventional mortgage so that is one uh basically uh instrument of uh islamic financing now does it does it does it make it different to be technically different yes it makes it different here's here's the here's the point that we have to agree uh to disagree on some people say that we look so naive and we look so idiotic in front of all people that we are actually trying to it is basically like setting up the net on friday uh and we're doing it and we know that everybody knows that we're doing it to ourselves how could we do this the the issue here is that you do not want to open the floodgates you do not want to break that psychological partition between us and ribba we want to try as much as we can even if there are some technical differences we want to try as we can to have differences so we're not committing riba just like blatantly clear cut rib you know so that's the point so that's the first one the second one that you mentioned is the diminishing partnership and that the managing partnership is the one that has been chosen by you know uh like muslims that you know muslims who want to get into this business uh they can't as i said before choose the mura baja even though it may be easier because as i said after you uh after you uh give the the the funds you run out of funds after like four or five customers or like 20 customers or 100 customers you run out of funds so you will need to basically uh turn around and sell this contract to freddie mac or fannie mae and so that you could finance a other customers um to do this if you're muslim with the baha because you can't sell at that uh so that the diminishing partnership becomes the the became the favorite for uh you know the muslims that were like some of the muslims that were pioneers in this industry and i i'm not saying that they did not put effort they put effort i'm not saying that there are no differences there are differences are those differences functional differences you know sometimes maybe you know one of the functional differences in in for instance is that if the customer died you know in them one minute between you know the transferring the the funds to the seller and finalizing the contract between the financier and the final buyer uh if the customer died then the bank may be yeah you know uh yeah so but in the diminishing partnership we do have differences some functional differences but mainly it these are technical differences not functional difference but some functional differences if for instance the bank uh if the for instance uh you insure that the house but the house for some reason got for bed got totaled and the insurance company did not pay you uh the value of the house the the the the muslim financier will not be after you for uh what they have given you only for their share in you know uh in in in whatever payment that you will get their fair share in the payment that you will get if they now own 65 of the house you'll get 65 of the payment that you would get from the insurance company is that a functional difference it is honestly it is so but then there are many technical differences and there are some technical problems also because according to the iofi standards and that's the accounting and auditing you know for islamic financing institutions uh so according to the alfie sander according to the different fifa assembly standards there are some rules that are so difficult to uh to uphold by you know uh by those uh you know companies or by uh at least in in non-muslim majority countries at least when the laws maybe in malaysia could do that maybe in you know in some countries that are more accommodating of islamic financing you could do that but it is certainly very hard here in the us uh and there are multiple ones you know that they would ask you to be responsible for the insurance they'll ask you to be responsible for all maintenance even the basic uh essential maintenance uh they'll ask you to not sell the house for a certain number of years and if you must uh sell prior to the end of the agreement then you must buy them out first and then sell the house and so on and so forth many things that are and there's also some mutual binding promise involved that there are many issues and then the future save um whether it is by promise or contract because when when when you do uh uh basically a purchase the the house and each one of you has a share you will either promise to buy um a portion of the house every year until you completely buy them out or you agree on the same it is either a promise or a an agreement if it is an agreement it's a little bit more problematic but if it is binding promise from both sides it is also somewhat uh but that that is it is very difficult without this if it is very difficult to leave it up to the customer to purchase at the market price on the day of purchase so we would agree because then we cannot we cannot figure out how much uh the person will be paying uh we will just you know it would be 20 80 and then every year i will purchase a portion of the house uh at the market price on the day uh of sale that is to do it in a way that is completely uh compliant but that again becomes very difficult so are there clauses that are problematic are there maharaj outlets well yes because there are scholars that are working to find outlets does it takes so much work does it take many opinions that are outside of the form as i have does it take a lot of patch work it does as we said you know what are our options what are our options we either say um you know you don't need to buy houses you don't need to buy cars you don't need to buy equipment for business you don't need to to get into business ventures or we say you must have completely compliant contracts which are extremely extremely difficult and that is not to discourage people from pursuing what is better and from improving incrementally and we do say this all the time to all the muslim financiers we do say this all the time to them and we encourage them to provide better products but also we have to patronize them to to become large enough to have this the size so that they can dictate their terms so that's the the the diminishing partnership and finally we have the last one that that you mentioned mentioned mentioned which is the ajara and it is to a certain extent like the diminishing partnership and it's not like it but but the the the same types of problems that it is a commitment for 30 years where the financier is not going to wash his hands and walk away the federal seer is the owner is the laser and the the the the customer is simply the lessee he's not responsible you know he's not liable except in the cases of target or free negligence or wrong doing on his part islamically because we will have to apply the rules of ijara in islam can this that poses a lot of problems also to become an instrument of financing and then you get the financier involved at this level it causes a like a slew of problems so all of them have issues but all of them show promise at least to be technically different from the conventional mortgages so that muslims are not committing clear-cut riba although the contracts may not be you know 100 percent sharia compliant it now the fact that we got the clear cut ribbon out of the way makes it uh easier on us to say that these uh basically contracts are allowed to be party in these contracts it is halal to use them for your needs your various needs uh i'm just positioned so far is that these contracts because of the clauses that are not compliant uh amjad did not sign like a sort of like uh sign on these contracts completely uh without reservations but these i'm just said because of the these clauses that are not completely compliant these contracts are permissible for hajj if the if have a need these contracts are permissible and according to the the declining ownership in its current application in america is the one that amja favored uh in in its declaration excellence this is very very useful so again to summarize mashali went into a lot of technical detail uh the to summarize and again if i said something correct then then feel free to correct me uh obviously the way that these three contracts actually exist in the corporations in north america we're speaking primarily we don't know about europe we're not talking about europe but the ones in america and north america the ways that they exist realistically there are highly problematic clauses in all of these contracts even though the us are the basis of the theory is good but because these corporations are ensuring or trying their best to ensure that there is minimal or no loss to them so they put the onus of much of the burden and they put so many clauses that the functionality of the contract is actually somewhat similar not exactly similar to mortgages however they are not all the same and some of them are better than others and uh of those that are probably of the best in the north american scene are the companies that offer the diminishing partnership the musharraf again we're looking at the ones based in north america and that's the fatwa of amja so again shaykh we've spent more than an hour speaking i want to now be very very uh clear here and i'm going to give you the position of one of my teachers and mentors and if you feel uh free to to validate it or to reject it or to modify but i know you're very cautious i'm going to tell you what one of my esteemed mentors says and it is something that i feel comfortable saying now even though i delayed this for the longest time and that is that there is no doubt that the uh the islamic sharia complex sharia compliant loans that are given are highly problematic however given the increasing need given the situation of muslims in this land generally speaking middle class lower middle class and of course anybody who's struggling generally speaking the hajja is enough for them that they are allowed to avail themselves to these islamic uh alternatives even though they are not 100 percent uh permissible or 100 percent halal let us say but given the mitigating circumstances we will say that we can overlook the problematic clauses and especially uh those that are closer to the goals of the shady and have minimal clauses and that is without mentioning the names of corporations we don't want to do that but the one that is the diminishing partnership that having been said this isn't just an open license rather we encourage muslim entrepreneurs and businessmen to think of models that are more permissible that are more halal we also encourage the lay muslim to think long and hard that we haven't even discussed the issue is it even wise from an economic perspective to lock oneself into a mortgage for 30 years or to pay rent there are many economists muslims and non-muslims that are actually saying paying rent actually is better for those especially on the you know in their in the beginning of their careers they don't know where they're going to be going et cetera et cetera so we don't want to just give a blanket endorsement at the same time insha'allah for most average muslims it is permissible for them to purchase the house that they live in uh using one of these uh islamic alternatives and if they cannot find an islamic alternative these corporations are not accessible to them or they're not able to get a loan from them and their situation is not necessarily the rura but dire let's say [Music] i think am jihad the phrase hajamas i think which is a new term that was there but a strong hajja not necessarily in that situation perhaps even if they cannot find a sharia compliant one they might be allowed to even think of a conventional one this is what one of my teachers has said would you allow me to say this or would you want to put a caveat because i know you're very hesitant to to to say explicitly so what is your position shahina know because of the because of my reluctance and because of my hesitation to uh basically to have my own individual position i i just hide behind i'm just physician uh and i think that i'm this position is not really far away from what you said i i said you know the the only thing is that the person who is not able to find an alternative i would say ask the scholars that you trust to find i'm sorry the person who's not able to find an islamic alternative and feels that his hajja is such that uh the conventional one would be permitted for them i would i would tell them ask the scholars that you trust their judgment that you trust their party and trust their judgment um and it doesn't have to be one scholar ask you know a couple of scholars but both but both are all are trustworthy and you trust their deen and you trust their knowledge and uh it is okay to take the easier position if you are if you feel yeah okay i i can add that caveat shaken no problem we we we we mandate on the person to get a specific fatwa for themselves you're right about this so we i can add that so uh that is definitely this then we are in complete agreement okay alhamdulillah so inshallah with that final uh uh concluding thoughts we we spent a lot of time alhamdulillah we conclude on a very specific note here um any concluding thoughts from you any general no advice about this topic for our for our viewers well i advise myself and all the muslims to think good of the muslims to think good of the efforts uh you know that are being done by you know uh well-meaning muslims and uh we're not angels and uh no one is saying that uh we are angels you know what is non-one is saying that the muslim financiers are angels we make dua for them we certainly advise them and we advocate for the muslim customers and advise them as much as we can but we also make the offer for them because we know that things are not easy uh we know that they encounter many difficulties and it is not always because uh they want to make more money it is oftentimes uh because the the circumstances the laws the sort of the financial environment around them does not allow them to do better we still want them to do better but we also want to patronize them so that they can basically develop they can grow they can reach the size where they can have the the capacity uh to improve their contracts and to provide better products better financial products to the muslims and i i say to the muslims that we are in this predicament because of our condition our condition as an ummah and reality is rational reality is rational let's not blame anyone but ourselves for our condition uh reality is rational and you can't change it unless you are rational uh as well so let's keep our heads down keep working keep improving uh you know ourselves our families our communities our ummah and humanity at large so uh just a sincere consistent effort from each and every one of us will insha allah improve and change our reality we had a very very uh amazing interesting conversation i hope it was of benefit to our viewers uh and shaykh this inshallah is not going to be the last time we we have a back and forth this is the first time we had one but i hope inshallah we can do multiple sessions uh definitely um the uh for our viewers here the shaykh's phd uh was about medical issues and islamic faith so we definitely have to talk a lot about uh the the changing understandings of medicine and how they're going to impact as a practicing doctor and practicing shaykh as well so inshallah this is round one with our sheikh inshallah we're going to try to have other rounds as well uh jazakum allah we hope insha'allah that you benefited from this rather long and yet uh technical and yet also in sha allah very useful uh talk we ask allah azzawajal to grant dr hatim a long life full of piety and good deeds and good health we ask allah for alfie for him and his loved one and for us and our loved ones we ask allah azzawajal to accept all that we do to forgive our shortcomings to exalt our ranks and to ask and to cause us to die upon the kalima of muhammad rasulullah until next time salam alaykum [Music] rahmatullahi foreign

Channel: Yasir Qadhi

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Keywords: yasir, qadhi, official, islamic, scholar, Islam, Quran, Sunnah, Hadith, Bukhari, Muslim, Islamic Finances, Islamic Loans, Islamic Ruling on Shariah Compliant Mortgages, Islamic Finance, Mortgages in Islam, shaykh dr. yasir qadhi, messengers of allah, Halal Loans, Loans in Islam, Money in Islam

Id: l3prA2vbveE

Length: 88min 18sec (5298 seconds)

Published: Thu Jul 16 2020