Islamic Finance: Prohibited Elements and Activities in Islamic Financial System (Part 3)

The last category for the PROHIBITED  elements in the contract of Islamic commercial transactions are as following:
  • Monopoly
  • Prohibition of Hoarding (Iktinaz)
  • Price Control
Monopoly – The practices of monopolies for commodities, food and services is wrong doer. A monopoly means a firm only a single producer of commodity of which there is no close substitute available in market. The firm could rise the prices of the commodity if an external force interferes in the market. The practices of monopolies from a single firm which control the supply and prices of commodities, food or services have to be eliminated if by this control the majority of people suffer and causes hardship to people life. 
Al Quran statesment that injunctions to the issue of monopoly:
“Whoever seek the wrongful partiality therein him we shall cause to taste a painful doom”
The above verse interpreting by Al – Qurtubi, mentions that Abu Daud reported reported from Ya ‘la bin Umayyah that the prophet said to the effect:
“Monopolizing foodstuff during the sacred months is wrong”
A hadith related to monopoly:
Al – Tirmidhi reported that the Prophet (s.a.w) had declared : “He who monopolizes is not but a wrong doer”
Prohibition of Hoarding (Iktinaz) – Islam prohibited and condemned the hoarding of wealth, money and other things – gold, silver and another important commodities – to spend not in the way of Allah. 
Al Quran verse related to  hoarding:
“And those who hoard gold and silver and spend it not in the way of Allah: announce unto them a most grievous penalty – on the day when heat will be produced out of that (wealth) in the fire of hell, and their backs, This is the (treasure) which ye boarded for yourselves: taste ye then, the treasure ye hoarded”. Quran, Surah Al – Taubah (Verse 34, 35)
The Prophet said: “He who hoards with the intention of raising the price for a Muslim is a sinner”
Man should use his property properly. The property that has been produce must be consumed promptly. Therefore the practice of hoarding can cause hardship to the people and hinders the smooth running of the business. 
The Prophet said: “He who hoards with the intention of raising the price for a Muslim is a sinner”
And in Islamic economic system, zakat that paid by muslim is an obligations, it is his obligations with punishment of God and in the same time the payment of zakat is one of the way for muslim in participating in the states of economic productivity. Anyway, the payment of zakat does not absolve those who hoard their wealth.
Price Control – There are two issues in price control that the Muslim jurist discuss: price ceiling and under selling.
Price Ceiling: In price ceiling issue there are two views, one is inclined towards fixing the price ceiling and the other is against it and is inclined towards open market price. Those who uphold the theory of price control argue to ban the sale of goods above the market price and abuse the customer. They also argue that selling above the market price have to be determined by the authority in accordance with the assessment for the interest of seller and customer. In addition, their opinion is the seller is not barred to take a profit yet he is not authorized to make excess profit to the detriment of the public.
Under Selling: The view of Fuqaha on this issue, such as the Shafi‘i and the Hanbalis allow under selling and disagree to restrains it. The sellers allow to sell their goods under market value. This view is based on the Hadith of Prophet (S.A.W) which says:
“Leave people to receive the bounty of Allah from among them”
Another view about under selling, the view of Imam Malik, Abu al – Walid al – Baji says:
“That to which anyone who goes below it must be ordered to conform to the rate quoted by the majority. If an individual or a few people go their own way and cover the rate, then they must be ordered to conform to the rate of the majority”
Another supporter of Maliki school says:
“Except for wheat and barley they must sell at the market price or else move on. The importer of wheat and barley may sell as he wishes, through among themselves the rules of the market applies. If a few of them sell cheap they must leave, while if many are selling cheap the rest must be told to conform to the general rate or move on. This applies to any commodity that is sold by measure or weight, wether foodstuff or not, though not to anything that is not sold in this way because price control is impossible here due to the lack of exact equivalence”
The different view from Fuqahaon the  under selling issue, seems to be concerned with the interest of small traders and the public. Both of the different viewer agree that their views are not applicable to all type of goods, situations or classes of traders. 
The issue of under selling, remind me to the supplier of fashion products which producing the large number of product for one style in a certain time so she could lower the price of the products. Fortunately, the people, the fashion communities interest to buys those products for own use or some of them become reseller that can be a source of income for them. With this condition, the community and the supplier get the advantages from this kind of business. 
In conclusion related to price control, it is agreeable if price control must be imposed only after consultation with the traders, such as for the essential foodstuffs in a certain period of time where the public is in serious need of them, and its imposition should not lead to a situation where the traders resolve to black – marketing. 

Read More: 
INCEIF Essay by  Syed Ahmad Hashmi, Bilal Aziz, Ahmad Farhan & Asyraf Azhar (2014), Prohibited Elements in Islamic Commercial Law


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