Scholar Answers

Yusuf Talal DeLorenzo, currently lives in the U.S.A, and has been in the Islamic Banking and Finance scene for a long time.

Presently he is Chief Shariah Officer and Board Member at Shariah Capital.

Shaykh Yusuf is a well-known and respected Shariah advisor and Islamic scholar whose career spans more than 30 years. Based in the Washington, DC area, he serves as a Shariah advisor to over 20 global financial entities, including index providers, banks, mutual funds, real estate funds, leasing funds, institutional investors, home finance providers, alternative asset managers and others.

Shaykh Yusuf is the author of “A Compendium of Legal Opinions on the Operations of Islamic Banks”, the first English reference on the fatawa issued by Shariah boards. His three-volume publication has become the standard reference for Islamic financial institutions. In addition, Shaykh Yusuf wrote the introduction to “Islamic Bonds”, the 2003 book that introduced Sukuk and transformed the world’s Islamic capital markets. His written work has appeared in journals and newsletters and as chapters in books, including Euromoney’s “Islamic Asset Management”, “Islamic Retail Finance and Islamic Finance: Innovation & Growth”. His entries on the terminology of Islamic Finance appear in The Oxford Dictionary of Islam.

Shaykh Yusuf is also a special consultant, appointed by the Asian Development Bank and the Islamic Development Bank in Jeddah to the International Financial Services Board (“IFSB”) on the subject of Sukuk. IFSB is the international standard-setting body of regulatory and supervisory agencies that have a vested interest in ensuring the soundness and stability of the Islamic financial services industry, broadly defined to include banking, capital markets and insurance.

Shaykh Yusuf has served as a judge in Islamic product reviews and has been a keynote speaker at numerous Islamic conferences. He has been interviewed by and quoted in the Financial Times, The New York Times, Fortune, The Wall Street Journal, Banker Middle East, Islamic Business & Finance and other publications.

Past assignments include

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: Is there any restriction in the extent of profits we can take from our customers in halal business transactions in order not to violate Islamic law? I heard it must be less than 30%, is it true? what is the reason?

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: One of my friend bought 500 stocks for Vrio company for 35 dollars each stock share and the next day some Japanese company bought this Vrio company and the stock price shot up to 65 dollars and he decided to sell it. Is this allowed or not allowed according to Sharia'h? Please email the answer.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: I read that Islamic Banks usually make transfer of ownership just an option to sell at the end of a lease. Does this mean that during the commencement of the contract, Islamic Banks retain the ownership indefinitely and include an option to sell only if they feel it is rewarding?

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: Is there any right for a mudarib to share the incremental value ofthe rabbul maal's assets at the time of liquidation? Wassalam, Salim M Basalamah

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: Is the following transaction classified as Murabahah? If not, is it permissible? I invest a certain sum of money in a company to procure certain raw materials for a fixed rate of return and for a turnaround time of one month. The capital gets re-invested every month and I receive the income monthly as well.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: is it okay to put money away for retirement? if so, do you recommend any specific type of funds?

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: My question is about taking a loan against my vested account balance. I've been told that any money borrowed must be repaid with interest. Essentially, I must repay myself with interest. I've made the argument with the plan administrators that since the account does not accumulate at some pre-determined fixed rate of interest (there is both chance of gain and loss) why should I be compelled to repay my loan with interest. They think that I should be glad to repay myself with interest and thereby protect myself from adverse market conditions, etc. I've explained my position with regards to Islam and they have still refused to honor my request for an interest free loan. What advice can you offer me? I could really use the loan to repair a house that I purchased interest-free.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: (South America) I was particularly interested to know what kinds of sectors islamic investors should avoid, like the financial sector. I assume that some smaller banks generate more revenue from profits arising investment returns on deposits received. Does it make sense to say that in a scenario where 80% of the bank's revenue is generated from investment returns (from financing development projects), then from whatever returns I might make as a Muslim investor in this bank, I would have to cleanse 20%? I know that I am oversimplifying the scenario for most banks am not taking into account the fact that halaal investment projects in the bank might constitute only a small part of the bank's overall profit. But assuming a direct relationship (each % of halaal investment by the bank contributes 1% of profit to the banks bottom line), is my reasoning correct. I am also wondering to what extent my assumptions about the ratio of halaal to haram (investment vs loan financing) business dealings in a typical bank are sound.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: Why is hedging haram?

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: How does one goes about understanding the ruling of the different schools of thought (madhaahib) when so few people (in my world) know about the subject of finance?

Answer: This is a very good question. In fact, there are very few people qualified to help out in these matters at the present time. This is why Islamic financial institutions, if they are serious about Shari`ah compliance, will be sure to appoint Shari`ah Supervisory Boards.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: Is there an area where buying and selling stock, even if it is acceptable stock, when itbecomes like gambling? Especially when it is short-term speculation. If it is, then where is thedividing line? And is day trading allowed by the Shari'ah in the qualifying stocks?

Answer: There is a well known hadith of the Prophet, upon him be peace, which is also an important

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: What is the Islamic view on employee stock options?

Answer: This is one which many Muslims puzzle over, and with good reason. To begin with, the term "options" often leads to confusion because most Muslims recognize it as perhaps having to do with the options market; and the buying and selling of options is clearly prohibited owing to the element of uncertainty, or gharar, at the time of contracting. (For a detailed discussion of gharar, see: "Lesson Two, Riba and Gharar").

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: I am having trouble understanding the difference between murabahah and interest. What isthe difference between buying a car with a fixed rate of profit in installments and paying a carnote that involves riba? Aren't loans that include riba at a fixed rate also? Can the middle personcharge a higher price because the payment is in installments?

Answer: There is in fact a world of difference between the two. Unfortunately, though, because the end

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question: I am a bit confused about the Termination of a Mudarabah contract. On one hand, the lesson indicates that, according to general usuli principles, no minimum limit can be placed on the cancellation of such a contract. However, later on the in the lesson, there is an indication that, based on the complexity of today's financing arrangements, the rabb-ul-mal and mudarib can agree that the contract cannot be cancelled during a specified period.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: If in mudarabah partnership, mudarib has had some losses and inanother transaction he reaps profit. This means that profit should be taken to offset thelosses first and the remaining profit, if any, can be distributed to all the parties according to the pre agreed proportion. My question is which losses should be offset? Losses in capital owned by robbul maal or loss in mudarib's effort?

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: My understanding was that only in extreme cases should a Muslim tolerate riba.For example, scholars have allowed Muslims to hold bank accounts even if they incur intereston the pretext that they cleanse their money from the interest accumulated.

In the case of bank accounts it could be accounted as a need since it would almost beimpracticle for one to keep his money at home in paper form. Thus the need for a bank account

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: In lesson 1 we learnt how a Muslim investor may trade in common stock so long as thepreconditions apply. In the section "The debate over Riba" it was clearly mentioned that whena company derives benefit from interest, the Muslim investor will be responsible for cleansinghis holdings.

My question is :

1) How can one work out what percentage of riba is involved in their money ? It would seem

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: I would like to know if it is halal to lease from a kufar financialinstitution?

Answer: If a lease can be structured in a way that conforms with Shari`ah principles (as in an ijarah contract), it will be lawful, regardless of whether the lease originates from a conventional financial institution or otherwise. Many Islamic banks, investors, and financial institutions participate in leasing operations that comply with Shari`ah principles and yet involve conventional financial institutions.

The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.

Question:: In this chap. it states that leasing is haram. Because the contract is kept suspensefor a certain amount of years. I've always thought that islamic banks do conduct their businessthis way. For example, say that you are leasing a car from a financial institution. Doesnt theislamic bank buy ther car and then they lease it to you for a set amount of years, and when the