Test Your Islamic Finance Knowledge

Buying a house for $450,000 and paying it in instalments over 5 years is a permissible arrangement because it allows the buyer to spread out the payments over a longer period of time, making it more affordable. This arrangement is common in real estate transactions and is often referred to as a mortgage. The buyer will make regular payments towards the house, including both principal and interest, until the full amount is paid off. As long as the buyer fulfills their payment obligations, this arrangement is considered permissible.

Gharar refers to uncertainty and deception, among other things. This statement is true because gharar is an Arabic term used in Islamic finance to describe any form of uncertainty or ambiguity that is present in a contract or transaction. It is considered to be against the principles of Islamic finance, as it involves elements of deception or excessive risk-taking. Therefore, the statement accurately describes the meaning of gharar.

In a sale transaction, the transfer of ownership of the asset happens immediately and completely. This means that once the sale is completed, the buyer becomes the new owner of the asset and the seller no longer has any ownership rights. Therefore, the statement is true.

Exchanging US$105 with AUD$100 on the spot is permissible because the exchange rate between the two currencies is favorable for the person exchanging the money. They are receiving more Australian dollars for their US dollars, which means they are getting a better value. This type of exchange, known as spot exchange, allows for immediate transactions without any delay or additional fees. Therefore, it is acceptable to exchange US$105 for AUD$100 in this scenario.

The given statement is false. It is not permissible to sell a commodity before it comes under our control or we take possession of it, excluding Salam and Istisna arrangements. In Islamic finance, it is important to have ownership or control over the commodity before selling it to ensure transparency and fairness in transactions.

The statement is false because offer and acceptance are essential elements of a contract. Without these two elements, there is no mutual agreement between the parties involved, and therefore, the contract cannot be considered valid.

Speculating on short-term price fluctuations by buying shares is considered speculation rather than investment. Speculation involves taking risks in the hope of making quick profits, while investment focuses on long-term growth and income generation. This distinction is important because speculation is generally seen as a more risky and speculative behavior, while investment is considered a more prudent and strategic approach. Therefore, buying shares for short-term price fluctuations is indeed considered speculation and is prohibited as a trading practice.

The preservation of wealth (Maal) is indeed one of the core aims or objectives (maqasid) of the Shariah. Shariah law emphasizes the protection and preservation of individuals' wealth and property rights. This is done through various principles and guidelines that govern transactions, contracts, and economic activities. By preserving wealth, Shariah aims to ensure economic stability, fairness, and the overall well-being of society.

In musharaka, partners who invest in the business have an equal right to the profits and losses of the venture. They do not have the right to specify a fixed amount of profit from the beginning. Instead, the profit is distributed among the partners based on their agreed-upon profit-sharing ratio. Therefore, the statement that a partner in musharaka can specify a fixed share of profit is false.

In Musharaka (joint venture), the profit ratio is not necessarily fixed according to capital contribution. Instead, it can be negotiated between the partners. However, the loss ratio must be fixed at the start of the venture. Therefore, the statement is false.

Riba al-Fadl does not refer to a delay in the settlement of one or both counter-values. Instead, it refers to the excess or increase in the quantity of one of the counter-values in a barter transaction. This excess is considered to be a form of riba (usury) and is prohibited in Islamic finance. Therefore, the correct answer is False.

The given statement is false. The subject matter in a contract can include both tangible and intangible things. Usufruct, which is the benefit from someone else's property, is an example of an intangible subject matter that is commonly found in lease agreements. Therefore, the statement that the subject matter in a contract cannot be anything that is not tangible is incorrect.

According to shari'ah, not everything that has economic value is considered wealth. Shari'ah defines wealth as something that has economic value and is permissible for a person to possess and use. Therefore, while economic value is a factor, it is not the sole determinant of whether something is considered wealth according to shari'ah.

The statement is true. It is permissible to have a contract that combines contracts of sale and lease if they refer to the same asset, such as a Hire Purchase contract. This type of contract typically involves a lease for a certain period of time, with the option to purchase the asset at the end of the lease period. Therefore, the correct answer should be True.

Late fees are not permissible just by mutual agreement at the start of a contract. The permissibility of late fees is determined by the laws and regulations of the relevant jurisdiction. In some jurisdictions, late fees may be prohibited or limited by consumer protection laws. Therefore, it cannot be assumed that late fees are always permissible simply because they were agreed upon at the start of a contract.