Developing Halal

Business: The 360

Degree Approach

PA Shameel Sajjad – CEO, Al Jamia

Al Islamiya
THE ISLAMIC PRINCIPLES
PERTAINING TO HALAL & HARAM
 1. The Basic Asl Refers to Permissibility
• The first rule established by Islam is that the things
which Allah has created and the benefits derived from
them are essentially for man's use, and hence are
permissible.
• Nothing is haram except what is prohibited by a sound
and explicit nas (Nas denotes either a verse of the
Qur'an or a clear, authentic, and explicit sunnah
(practice or saying) of Prophet Muhammad.
• If the nas is not sound, as for example in the case of a
weak hadith, or if it is not explicit in stating the
prohibition, the original principle of permissibility
applies.
• Allah says: It is He who created all that is in the earth
for you.... (2:29)
• He has subjected to you, from Himself, all that is in the
heavens and all that is on the earth.... (45:13)
• In Islam the sphere of prohibited things is very small,
while that of permissible things is extremely vast.
• There is only a small number of sound and explicit
texts concerning prohibitions.
 2. To Permit and to Prohibit Ultimately is
the Right of Allah Alone
• The second principle is that Islam has restricted the
authority to legislate the haram and the halal, taking it
out of the hands of human beings, regardless of their
religious or worldly position, and reserving it for the
Lord of human beings alone.
• Do they have partners (with Allah) who have
prescribed for them in religion that concerning which
Allah has given no permission? (42:21)
 3. Prohibiting Halal and Permitting
Haram is Similar to Shirk
• Islam reprimands all those who, on their own authority,
declare what is lawful and what is prohibited.
• Say: Who has forbidden the adornment of Allah which
He has brought forth for His servants, and the good
things of His providing?...Say: What my Lord has
indeed prohibited are shameful deeds, whether open
or secret, and sin and rebellion without just cause, and
that you associate with Allah that for which He has
sent down no authority, and that you say concerning
Allah that about which you do not know. (7:32-33)
 4. Prohibition is Due to Impurity and
Harmfulness
• It is the right of Allah, the One Who created human
beings and bestowed innumerable gifts on them, to
legalize or prohibit as He deems proper, and to place
obligations and responsibilities upon them as He sees
fit.
• He makes things halal and haram for a reason, with
peoples' well-being in view.
• Accordingly, He has neither permitted anything except
what is pure nor has He prohibited anything except
what is impure.
• If something is entirely harmful it is haram, and if it is
entirely beneficial it is halal; if the haram of it
outweighs its benefit it is haram, while if its benefit
outweighs its harm it is halal.
• This principle is explained in the Qur'an in relation to
wine and gambling: They ask thee concerning wine
and gambling. Say (O Prophet): In them is great sin
and some benefit for human beings, but the sin is
greater than the benefit.... (2:219)
• The Muslim is not required to know exactly what is
unclean or harmful in what Allah has prohibited; it may
be hidden from him but be apparent to someone else,
or its harm may not have been discovered during his
lifetime but may be understood at a later period.
• What is required of a Muslim is simply to say, "We
have heard and we shall obey”.
 5. Halal is Sufficient; while Haram is
Superfluous
• One of the beauties of Islam is that it has prohibited
only such things as are unnecessary and dispersible,
while providing alternatives which are better and which
give greater ease and comfort to human beings.
• This point has been explained by Ibn al-Qayyim:
Isthikhara to drawing lots
Profitable trade to interest
Beneficial sports to gambling
Other types of clothes (cotton, linen, wool etc.)
for silk
 6. Whatever is Conducive to Haram is
itself Haram
• Another Islamic principle is that if something is
prohibited, anything which leads to it is likewise
prohibited.
• By this means Islam intends to block all avenues
leading to what is haram.
• A similar principle is that the sin of the haram is not
limited only to the person who engages in it but
extends to others who have supported him in this,
materially or morally; each is held accountable
according to his share.
 7. Representing Haram as Halal is
Prohibited
• Islam has prohibited resorting to technical legalities in
order to do what is haram by devious means and
excuses inspired by Satan.
• Jews were reprimanded for resorting to such
practices.
• The Prophet (peace be on him) said: "Do not do what
the Jews did in order to (technically) legalize Allah's
prohibitions by flimsy excuses.'' (Tirmidhi)
 8. Good Intentions Do Not Make the
Haram Acceptable
• Whenever any permissible action of the believer is
accompanied by a good intention, his action becomes
an act of worship.
• But the case of the haram is entirely different; it
remains haram no matter how good the intention, how
honorable the purpose, or how lofty the aim may be.
• The Prophet said: If anyone amasses wealth through
haram means and then gives charity from it, there is
no regard for him and the burden of sin remains.
 9. Doubtful Things Are To Be Avoided
• There is a gray area between the clearly halal and the
clearly haram.
• Some people may not be able to decide whether a
particular matter is permissible or forbidden; such
confusion may be due either to doubtful evidence or
because of doubt concerning the applicability of the
text to the particular circumstance or matter in
question.
• In relation to such matters, Islam considers it an act of
piety for the Muslim to avoid doing what is doubtful in
order to stay clear of doing something haram.
 10. The Haram is Prohibited to Everyone
Alike
• In the Shari'ah of Islam the haram has universal
applicability; here there is no such thing as that which
is prohibited to a non-Arab but permitted to an Arab,
nor anything which is restricted to a Black but allowed
to a White.
 11. Necessity Dictates Exceptions
• Islam is not oblivious to the exigencies of life, to their
magnitude, nor to human weakness and capacity to
face them. It permits the Muslim, under the
compulsion of necessity to eat a prohibited food in
quantities sufficient to remove the necessity and save
himself from death.
AN EVALUATION OF THE CURRENT HALAL
SCREENING NORMS: ARE THEY
COMPREHENSIVE?
• How does one know whether a business / investment
opportunity is halal or not; in the prevailing financial
environment.
• For those businesses whose critical information are there in the
public domain, such information can be used to assess their
investibility.
• The prevailing Shariah screening norms for equity investments
seek to provide this kind of information.
• The critical question then is; whether these indices express the
Shariah compliance/validity of businesses they feature in a
holistic manner or whether they give only a cross-sectional
view.
How do Shariah Indices Screen for Halal
and Haram
Shariah
Screening
Busines Financia
s l
Screens Screens
 Business Screening
• Businesses engaged in activities explicitly prohibited
by Shariah are excluded.
• Conventional banking
• Conventional insurance
• Alcohol
• Gambling
• Haram food
• Obscenity etc.
 Financial Screening
• Indebtedness of the enterprise (debt to TTMAMC) is
greater than or equal to 33%.
• Earnings from interest and impure income (cash +
interest bearing securities to TTMAMC) is greater than
or equal to 33%.
• Cash receivables of the enterprise (accounts
receivables to TTMAMC) is greater than or equal to
33%.
 Shariah Compliance - Is it Only About
Business and Financial Screens?
• Marketing, Sales and Advertisement.
• Human Resource Policies
• Operational Policies.
 Shariah Considerations in Sales,
Marketing and Advertisement
• Misleading advertisements are Shariah non compliant.
• Product / service deception.
• Coercive sales practices.
• Non disclosure of pertinent information regarding
product / service.
• Obscenity in advertisements.
 Shariah Considerations in HR Practices
• Treatment of employees.
• Payment of minimum wages and paying on time.
• Protection of employees from hazardous materials
and work environment.
 Shariah Considerations in Operations
• Effluent treatment.
• Impact on eco system.
• Damaging contents in products.
• Practices of adulteration.
Shariah Compliance
is much more than a
few financial screens
….
PRE REQUISITES TO THE
DEVELOPMENT OF HALAL BUSINESS
 Islamic
Islamic Entrepren
Business eurship
Consulting

Capital

Halal Industry
 Capital with Muslims
• “We estimate that there is not less than $200 bn in
Muslim owned assets under management in Geneva
alone” (John A. Sandwick, Encore Management S.A.)
• “The magnitude of philanthropic donations in Muslim
communities is estimated to total between $250 bn
and $ I trillion annually” (Usaid, Zakat, The Muslim
World Series, Sep 2005).
• “Islamic Banking assets are expected to grow to more
than $1000 bn by 2013” (General Council for Islamic
Financial Institutions, Feb 2006)
 Muslim Entrepreneurship
• Islam hails entrepreneurship.
• Business is considered to be one of the highest profession that
can be undertaken by a Muslim.
• The case with many other religions is on the other end; where
by all sorts of material pursuits are discouraged and asceticism
is regarded to be the ideal state of being to be achieved by a
man.
• One of the hadith states that the righteous trader will be among
Prophets, martyrs and the truthful on the day of resurrection.
• The spread of the religion of Islam was achieved not by solely
dedicated missionaries, but mainly by trading communities who
travelled to the different parts of the world.
 Modern Business Knowledge Meshed
with Shariah Considerations
• The post industrial revolution era marked the greater
economic power of Europe.
• Growing economic might translated into political and
military power; which led to colonization of most of the
countries of the world; which were deemed to be
sources of cheap raw materials, labour and market for
the finished products.
• The economic and financial paradigms of the
colonized world was changed.
• Even the Muslim countries could not resist the
newfound economic order which was largely abhorrent
to the Shariah norms.
• Modern management and technological
advancements were the virtues among the vile.
• In a sense of resistance towards anything that is alien
towards their culture; Muslims didn’t keep pace with
the advancements in management and technology;
which has progressively resulted in the eradication of
Muslims from the forefront of business and industrial
leadership in the modern world.
• For the development of halal businesses; modern
business acumen and Shariah conscience have to be
inculcated in the very same place and can’t yield
results while remaining as water tight containers.
 The 360 Degree Approach: The Quintessence
of Actual Shariah Compliance
• Allah says in the Quran: “Enter into the religion fully”.
• Intentions are more important than results. Man is
granted only what he seeks. “Allah will not change the
state of any people unless they change what is there
in their souls”.
• When somebody does ijthihad and arrives at the
wrong result, he is granted with one reward and when
he arrives at the correct result, he is granted two
rewards.
• The basic point is Shariah compliance has to be
merged into every stage of the business thought
process.
The 360 Degree Model of Halal Business

Shariah
Compliance

IT
Systems
Finance

Human
Operations
Resources

Marketing, Sales
and
Advertisements
• World Muslim population of 1.83 billion in 2009 out of
6.5 billion world population.
• Average annual growth rate of about 1.80% per
annum which does not include conversion which is on
the rise currently.
• Global halal products market is estimated at US$2.3
trillion excluding Islamic banking.
• If we include service sectors for the halal market, the
potential size of total market is astronomical.
THANK YOU