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Q:32- 1. The Pensions Funds Act 1956 ("Act") regulates pension funds in South Africa.

2. The object of the Act is to provide support for the dependants of a deceased member upon his death. The support is provided by means of lump sum payments and/or annuities.

3. A pension fund established in terms of the Act has separate juristic personality and must comply with prescribed requirements including registration, etc.

4. A contribution to a pension fund is deducted at source from the employees salary and paid over to the fund by the employer. The employer also makes defined contributions to the fund.

5. When the employee dies, the fund in accordance with its rules but subject to the Act pays death benefits to the dependants of the deceased, normally the surviving spouse and minor children, who were dependent on the deceased for maintenance in his lifetime.

6. It is crucial to understand that in making payments of the death benefits, the trustees of the fund exercise a discretion conferred upon them in terms of the Act. They are empowered in terms of the Act to make payment of the death benefits amongst the dependants in such proportions as they deem just and equitable in the circumstances of the particular case notwithstanding any nomination made by the deceased. Their decision is in terms of the Act subject to review by an appointed adjudicator and ultimately subject to review by the High Court (Section 37C).

7. The question therefore arises whether the death benefits awarded to the dependants of the deceased employee belong to those dependants, or whether the death benefits form part of the estate of the deceased. The Act specifically provides that those benefits will not form part of the deceased estate, and are not subject to attachment upon insolvency of a person entitled to a benefit.

8. In my humble view, the death benefits belong to the dependants of the deceased to whom they are awarded by the trustees of the pension fund in question. The reasons for this opinion is that:

8.1 The pension fund is a separate legal entity established and regulated by the Act;

8.2 The trustees in awarding the death benefits are exercising a discretion conferred upon them by the Act in accordance with its objects;

8.3 The contributions which were deducted at source did not belong to the deceased employee (in this regard, see the interesting Fatwa on Provident Funds written by your distinguished father Rah.

8.4 At best for the deceased, he had a claim against his employer for the amount representing the contributions deducted from his salary at source but this is not connected with the ultimate payment made by the trustees of the Pension Fund which is sourced in the Act and which regulates those payments designed for the support of the dependents only.

9. I would add that as regards the character of the death benefits, I agree with the said Fatwa of your distinguished father to the effect that they are halaal.

10. Please examine the aforegoing carefully and let me have your considered Fatwa on the question set out in paragraph 7 above urgently as I have a case on hand.
Besides, the issue is a common one and requires clarity. (M. S. Omar, South Africa)

A: In the light of the rules of the Pension Funds Act 1956 mentioned by you it appears that the grants given to the dependents of a deceased person from the Pension Fund are not subject to the rules of inheritance. The amounts deducted at source from the salaries of the employees are to be treated as a subscription to the Fund which no longer remain in the ownership of the deceased person and perhaps he has no right to claim it back during his life time. The principle is that only those properties of a deceased person are subject to inheritance rules which he can claim rightfully during his lifetime. Since he does not have the right to claim any amount from the fund, therefore, it is not to be taken as left-over property. The fund being a legal entity it can decide to pay this grant to whomever it deems fit from the family of the deceased. In the terminology of Islamic Fiqh this grant is a voluntary gift (Tabarru'), therefore, it is not necessary that it is to be distributed among all the legal heirs according to their prescribed shares in the inheritance.

I have given judgment in a Shariah Appeal fixed before the Shariat Appellate Bench of the Supreme Court of Pakistan with regard to the benevolent fund which is very similar to the Pensions Fund you have asked about. (A copy is being sent to you by mail for your perusal and record).

Contemporary fatawaa



Q:31- (1) Is it Jaiz (permissible) to take an insurance policy front a conventional insurance company to cover our employees against liability in the following circumstances:

** Injuries that may be suffered by workers (company employees) due to accidents in the course of their work.

*** within the company's premises.

*** whilst travelling in company vehicles.

*** Injuries that may be suffered by innocent parties involved in accidents within the company's premises or in company vehicles.

In the case of motor insurance it is a statutory requirement that vehicles owners must obtain an insurance policy to cover third party risks and the company complies with this requirement. This is the only form of insurance cover that the company now takes.

(2) Is it jaiz to take out an insurance policy to cover the anticipated medical expenses of the employees of the company?

(3) Most companies offer to meet the medical expenses of the employees of the company?

(4) There are circumstances in which the bank charges us interest when our current account goes into overdraft due to circumstances outside our control -- mainly due to non-realization of cheques issued to us by our debtors.

Is it jaiz for us to recover such interest from the debtor
concerned? (Rafiq Qasim, Colombo)

A: (1) The permissibility or otherwise of an insurance policy depends on the nature of the insurance scheme and on the terms and conditions of the transaction. But,
leaving aside the mutual insurance schemes, all the insurance policies available with the traditional insurance companies run on commercial basis have an element of
interest or qimar or both. Hence, they are not allowed in Shari'ah. So, it is not permissible to take an insurance policy from a conventional insurance company in any one of the first four situations mentioned in your question. The prevalent third party insurance also does not conform to the rules of Shariah. However, being a necessary legal requirement for the use of a motor car, it is allowed on the basis of necessity only in those countries where this kind of insurance is compulsory.

(2) The same reply is also applicable here.

(3) A company may create a mutual insurance fund of its own for this purpose. But it is not permissible in Shari'ah to take a policy from a traditional insurance company.

(4) If the interest is charged by the bank without your knowledge or without your having entered into an agreement with them for an interest---bearing transaction, you cannot be held responsible for the sin of paying interest. But at the same time, you cannot claim the amount of interest from your debtor, because in that case you will be entering into a transaction of interest deliberately.

Contemporary fatawaa



Q:29-  I have a considerable amount of money saved by me from my monthly income. I want to invest it in a lawful business which can give me some profit. One of my friends has offered me to enter into partnership with him, I shall give him the money and he will invest it in his business which is already established and run by him. He has agreed to pay me a sum of two thousand rupees monthly as my share in the profit. Is it permissible for me to enter into partnership on these terms?

A:  No. A pre-determined amount of money cannot be fixed as a profit in a partnership. If you want to enter into partnership with your friend, you will have to share his risks also. In case he faces a loss, you will have to bear it in proportion to your investment. And if the joint venture brings a profit, the same may be shared on the agreed ratio.

Thus the amount of profit can only be known after the profit accrues actually, and it cannot be fixed beforehand. However a provisional profit may be distributed before the actual accounting takes place. On this basis, the monthly payment of a particular amount may be agreed but it must always be subject to the final settlement at the end of the term. When this final settlement will take place on the basis of the actual gain or loss, all the provisional payments made earlier must be taken into account and must be adjusted according to the actual profit or loss. Without this necessary condition the said agreement of partnership will not be a valid agreement according to Shariah.

Contemporary fatawaa



Q:30- Kindly throw some light on the use of credit cards, which are floating in the market. Majority of these cards belong to professional banking institutions, such as American Express, City Gold Card etc. However, some cards are issued by companies such as Diners club etc, which are not themselves banking institutions. Please explain the ruling of Shariah about both these cards. In your reply please cover both the aspects of using credit cards, first as holders of the card, used to offset the purchase price and second, when we accept these cards as sellers.
(Muhammad Salman, Karachi)

A: The use of credit card by a purchaser is allowed in Shariah, no matter whether the card is issued by a banking institution or some other company. However, the following points must be borne in mind in this respect:

(i) The best way of using these cards is to open an account wherefrom all the amounts owing are debited by the issuing company to avoid the possibility of default which may in some cases, carry the risk of interest.

(ii) If the system of direct debit is not arranged, one must always be careful that he pays the bills within the stipulated time without fail, so that interest may not be imposed upon him.

(iii) The annual fee paid by a card-holder to the card-issuing company is not interest, rather it is a fee charged for certain services rendered by the company for the benefit of the holder that is why it is charged irrespective of the amount actually spent by the holder.

The second question is whether it is permissible for a seller to accept credit card. This question has been a point of debate between the contemporary scholars of Islamic jurisprudence. Some of them are of the view that the amount charged by the card-issuing company to the shopkeeper is analogous to interest. They say that it is equal to discounting a bill of exchange, hence not allowed in Shariah.

However, some other scholars are of the opinion that it is not interest. On the contrary, it is a fee charged by the company for certain efforts undertaken by it. Firstly, the company has to do a lot of work for the benefit of the seller. Therefore, the commission charged by it is similar to the commission of a broker which is undoubtedly permissible. This commission is different from discounting a bill of exchange, because the rate of discount in a bill of exchange is always tied 'up with the period of its maturity, while the commission charged by the company from the merchant is not so linked. This commission is determined irrespective of the time on which the card-holder shall pay the amount to the company. Therefore, it is just like a commission charged for brokerage services.

In my personal opinion, the second view seems to be more preferable.

Contemporary fatawaa



Q: 28- Observing Muslims all over the world which, unfortunately includes those living in Muslim countries, face the problems brought before them by unwanted interest money generated in their name through channels they do not control. This happens inspite of their being careful against whatever is likely to get them involved in interest bearing activity.

In case, interest does come into their accounts, no matter how unwanted, is there a valid way under the Shari'ah through which the identified interest amount can be disposed off?

1. Can it be taken out of the account and used to pay personal or company income tax.?

2. Can it be used to pay for Insurance dues on cars, houses, materials, businesses, stores, etc.?

3. Can interest money be given as part of his or her salary for work to a non-Muslim? Would that apply to Jews and Christians as well?

4. Can this be given to non-Muslim charities unusually solicited through mail, door-calls and ads, such as, Blood Banks, Heart Associations, Community Service groups, Welfare Committees for the aged, sick, disabled, prisoners and similar others under disadvantage?

5. There are individuals on the streets and subways asking for help. Are they entitled to be given this money?

6. There are non-Muslims one knows live under very low income, levels. Would they be preferable as recipients of this interest money?

7. Is it permissible to give this money to Muslims falling in some of the above categories?

8. Is it all right to give this money to:

a) make toilets in masajid?

b) help counter anti-Muslim propaganda as claimed and accepted by a known Muslim institution in South Africa?    (S. Ahmed New York)

A: As a general rule, no Muslim by his free choice should invest or deposit his money in an interest-bearing scheme or account.

If a Muslim has deposited his money in an interest-bearing account for any reason, or the interest has come to his account without his choice or intention, he should not receive the amount of interest, but should surrender it to the payer of interest.

However, in non-Muslim countries he can receive the amount of interest with a clear intention that he will not use this amount for his personal benefit. In this case it is incumbent upon him to give this amount as Sadaqah to the poor who do not have the nisab of Zakah. This is not the normal Sadaqah which a Muslim gives out of his lawful income with an intention to get reward in the Hereafter. Instead, this Sadaqah is meant only for disposing off an unclean and unlawful money and to relieve oneself from the burden of an ill-gotten gain.

But it should be remembered that this amount is unclean only for the person who has received it as interest. The poor persons who get it from him as Sadaqah can use this amount for their personal benefits. This amount can also be given to one's close relatives who are entitled to receive Zakah. Even one's adult children can receive this amount from him, if they are so poor that they can receive Zakah.

Keeping these rules in view, the certain answers to your questions are as follows:

(1) No, if the amount of interest is used in paying income tax or other government taxes, it amounts to using it for personal benefit, hence it is not permissible. Some contemporary scholars of Shariah, however, have allowed it only where the banks or financial institutions are nationalized. But I am not satisfied with this proposition. It is a very grave sin to use interest-money and one should not seek such devices to use the same for his own benefit.

(2&3) No, all these uses are beneficial to the holder of interest-money, hence impermissible.

(4) As mentioned above, the interest-money can only be given as Sadaqah to those entitled to receive Zakah and the Sadaqah can only be performed through tamlik, i.e. by making the payee owner of the amount. So, this amount cannot be given to any welfare Scheme where it is spent in office expenditure, salaries of the staff, construction of building or purchasing things of public use without giving it in the ownership of a particular person. The interest-money therefore should be given to some poor person entitled to receive Zakah. But unlike the Zakah money, the amount of interest can also be given to a poor non-Muslim who does not own the value of nisab (threshold).1

(5) If they are so poor that they do not have the nisab of Zakah, the interest-money can be given to them.

(6) As mentioned earlier, the interest-money can be given to a non-Muslim also subject to the condition just mentioned in answer to question 5.

(7) Yes, if they are entitled to receive Zakah, they can be given the interest-money also.

(8) As mentioned in answer to question no.4 this Sadaqah must be performed through tamlik. So, the amount cannot be used for making toilets of a musjid or in the general expenditure of a Muslim association.'

Contemporary fatawaa


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