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:: I asked previously and received no reply what are the essential components to a contract according to the different madhhabs? Also, some say that the offer and acceptance element of the contract is not present if you are a shareholder because you have a very limited say. is this accurate?

Answer: The classical jurists are in agreement that every legal contract is composed of a pillar

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

Question:: I am employed in an insurance company (my whole career of 28 years) in the capacity of an M&A analyst and management professional. Is there guidance around theacceptability of this employment --- in context of the exclusion of insurance industry from Shariah acceptable companies? Does my salary have to be purified? If so, how --- your lessons are focused on shareholders, not employees? What if, after so many years and having reached an older age, I am not easily employable at even 30% of my income if I shift industries?

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

Question:: It has been stressed a number of times the that "the Muslim investor will be morally bound to inform management that s/he cannot approve of such transactions." How should a Muslim investor structure a letter to satisfy such a criteria andwhat kind of items and "arguments" should he put forward to the management/investorrelations of a company so that the letter satisfies the Islamic requirement and is

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

Question:: My question has to do with preferred stock and whether or not they are halal. In the lesson it mentioned that those that pay dividends are guaranteed, so it is not allowed. This is true of cumulative preferreds, but regularly "non-cumulative preferreds" only pay dividends when the company has earnings. My question is, the security haram if it is guaranteed, or is it haram if it pays a fixed dividend?

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:: What is the consensus about investing in Israeli companies, or companies that invest in Israel? Should those not be excluded by the Shari`ah screens like companies that deal with Alcohol, pork, banks, etc...? Salam R Tarek

Answer: To our knowledge there is no Shari'ah dialogue involving investment prohibition against Israeli companies or companies that invest in Israel. The Shari'ah screens do not take political background/identity or religious affiliation into account. The Prophet himself, upon him be peace, is known to have transacted with people of other

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

Question:: In the quiz for the lesson called What is Islamic Investment I have answered question number 8 as True, (a. true), and my answer was wrong (only one wrong in ten questions; I have answered the rest correctly.) Then I have reviewed my wrong answer,the explanation was that "Currently, funds claiming to be Islamic are not required toprove that they are Shari'ah compliant. Many do not employ the stringent criteria of

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

Question:: I had a question about investing in the stock market I have heard that it was questionablebecause of a condition that is necessary in an islamic contract - that of ijaab and qabool (offerand acceptance). I have heard that when people are in a contract with one another (in any form,including as shares of a company), that a necessary element in the islamic contract is that the

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?