Islamic Bank and Finance: Imam Abu Hanifa

Imam Abu Hanifa was born in the city of Kufa in Iraq. His father Thabit bin Zuta was also a trader from Kabul, Afghanistan. Imam Abu Hanifa was born 67 years after the death of Prophet Muhammad. Imam Abu Hanifa was greatly known for city planning, he was responsible for the city of Baghdad when it was founded. He was also a mathematician of the first magnitude. He had a lot of specific technical knowledge and used to implement it in his works. He was a rich man, a trader by profession and contributed a great deal in terms of financial aspects. He learned trading from his grandfather. Imam Abu Hanifah was the founder of Sunni Hanafi school of Fiqh (Islamic Jurisprudence). He was the one to define the principles of Fiqh (Usool e Fiqh). He helped in various Riba related policies and how the Islamic finance can be moved towards a better direction then the current conventional banking. Imam Abu Hanifa also cleared many doubts relating to some financial instruments that were present in his time and showed the right way according to Quran and Sunnah.

Meeting of Imam Malik and Imam Abu Hanifa

Abu Hanifah was a silk fabric dealer. He used to offer silk fabrics in Kufa. He was outstanding for his genuineness and honesty in exchanges. Exchange profited him a ton in picking up learning of the exchanges and traditions of individuals in exchange. That set a handy check on his legitimate teaching (Fiqh) and influenced him to view the traditions when in doubt of enactment based on which numerous guidelines were figured.He said, “Knowledge never sinks into the mind of a person who acquires it for worldly purposes.”Abu Hanifah believed that interest for a Muslim in Darul Harb (A non-Muslim Country) is allowed by in certain conditions that include:

1. The person has a genuine need and reason,
2. He does not intent for any fraud or default,
3. He has no other way or option in that situation. Riba is prohibited in Islam but these are some conditions for extreme situations that a Muslim might face.

Imam Abu Hanifah characterized Riba Al Fadl, which is to exchange two commodities that are different and one gets a excess benefit, into two possible scenarios that are Weight and Volume. This implies that the transaction should be hand to hand and none should receive excess benefit because that would be considered Riba Al Fadl.Imam Abu Hanifa also presented his view on an important financial instrument that is Sub Lease. In the event that the rented resource is utilized distinctively by various clients, the resident can't sub-rent the rented resource aside from with the express authorization of the lessor. In the event that the lessor allows the resident for subleasing, he may sub-rent it. In the event that the lease guaranteed from the sub-renter is equivalent to or not as much as the lease payable to the proprietor/unique lessor, all the perceived schools of Islamic law are consistent on the pass ability of the sub rent. In any case, the suppositions are distinctive on the off chance that the lease charged from the sub-resident is higher than the lease payable to the proprietor. Imam al-Shafi'i and some different researchers permit it and hold that the sub lessor may appreciate the surplus got from the sub-renter. This is the favored view in the Hanbali school also. Then again.

Imam Abu Hanifah is of the view that the surplus got from the sub-renter for this situation isn't reasonable for the sub-lessor to keep and he should give that surplus in charity. In any case, if the sub-lessor has built up the rented property by adding something to it or has leased it in a money not the same as the cash in which he himself pays lease to the proprietor/the first lessor, he can guarantee a higher lease from his sub-resident and can enjoy the excess. Despite the fact that the perspective of Imam Abu Hanifa is more safeguarded towards which ought to be followed up on the most ideal degree, in instances of need the perspective of Shafi’I and Hanabali schools might be taken after in light of the fact that there is no restriction in the holy Quran or in the Sunnah against the surplus asserted from the resident.Imam Abu Hanifah and Imam Shafi’I were among the pioneers that introduced the debates and legality on sukuk, another important financial instrument nowadays. Each of them introduced their own ijtihad methods to conclude at the rulings on sukuk. Thoughts of Imam Abu Hanifah can be found in the introduction of Fiqh and Usool e Fiqh(Principles).

According to Imam Abu Hanifah the term Sukuk can be equated to bai’u al-gaibah (sale without available items). In formulating the legal ruling, Imam Abu Hanifah was more rationally inclined and contextually derived. He introduced his theory on the behalf of the istihsan method. The contemplations of Imam Abu Hanifah and Imam Syafi'i to decide the pertinent legitimateness of sukuk instruments are practically equivalent to the aqd al-salam, aqd al-istihna', and aqd al-ijarah, in light of the fact that the deal and buy of these exchanges are without the question. These two inescapable researchers surrendered qiyas technique. Imam Abu Hanifah utilized istihsa bi al-nas, istihsan bi al-ijma', furthermore, al-istihsan bi al-darurah hypothesis. Meanwhile Imam Syafi'i utilized takhsis technique, the levels of legitimate decisions (masadir al-ahkam), and fundamental comprehension on the dialect. In spite of the fact that verbally the ijtihad technique for these two fast approaching researchers is extraordinary, anyway the definition of lawful decisions on sukuk by Imam Abu Hanifah, through istidlal al-hukm, and Imam Syafi'I, through istinbaht al-hukm permitted the sukuk instruments in light of Islamic legitimate decisions.

Imam Abu Hanifah and Imam Ahmad are of the view that no commitment in kind is worthy in a Musharakah. Their point of view depends on two reasons: They say that the commodities of each accomplice are constantly recognizable from the products of the other. For instance, if A has contributed one machine to the business, and B has accompanied another machine, every single one of the two machines is the elite property of its unique proprietor. Presently, if the machine of A is sold, its deal continues ought to go to A. B has no privilege to guarantee an offer in its cost. Accordingly, so far as the property of each accomplice is recognized from the property of the other, no association can occur. In actuality, if the capital put by each accomplice is as cash, the offer capital of each accomplice can't be recognized from that of the other, in light of the fact that the units of cash are not distinguishable, in this way, they will be considered to shape a typical pool, and subsequently the organization appears. Besides, they say, there are various circumstances in an agreement of Musharakah where the accomplices need to depend on redistribution of the offer cash-flow to each accomplice. In the event that the offer capital was as products, such redistribution can't happen, on the grounds that the items may have been sold around then.

On the off chance that the capital is reimbursed based on its esteem, the esteem may have expanded, and there is a probability that an accomplice gets all the benefit of the business, due to the thankfulness in the estimation of the products he has contributed, leaving nothing for the other accomplice. On the other hand, if the estimation of those items diminishes, there is a plausibility that one accomplice anchors some piece of the first cost of the product of the other accomplice notwithstanding his very own venture.There is a major distinction between putting a condition in the deal and making a different guarantee without making it a condition. On the off chance that the condition is explicitly said at the season of offer, it implies that the deal will be legitimate just if the condition is satisfied; meaning in this manner that if the condition isn't satisfied in future, the present deal will end up void. This makes the exchange of offer dependent upon a future occasion which might possibly happen. It prompts vulnerability (Gharar) in the exchange which is completely prohibited in Shari'ah.Imam Abu Hanifa also contributed to Dimishing Musharakah, another important financial instrument. This instrument implies that the owner and financer will be joint owners of the commodity and the financer will be paid off his share by the client in installments eventually decreasing the share of the financer and finally have no share of the financer in the end, while the client will have full ownership in the end of the installment periods.

Imam Abu Hanifa and Imam Zufar were of the view that the commodity’s third undivided share cannot be leased out to a third party except the client and the finaner. While some other Imams believe that the undivided share can be sold out to a third party.Imam Abu Hanifa had a vast knowledge of Islamic Law. He studied law from the scholars in Kufa and afterwards from other teachers in Makkah. He was a very successful businessman who would never go against Quran and Sunnah. Once Imam Abu Hanifa’s business partner sold a consignment without letting the customer know about its little defect. When Imam Abu Hanifa got to know about this event, he immediately ordered the proceeds of that sale to be given in charity. He never failed to be an perfect example for how should one conduct and earn an honest living. Another example is when a women came to Imam Abu Hanifa with a silk dress, which she intended to sell for 100, but Abu Hanifa would not agree to buy it because he insisted that it has a value of more than that. That women went upto 400 but Imam Abu Hanifa was still insisting that she should demand more. That women looked at him suspiciously and said “Are you mocking me?” Imam Abu Hanifa said that she should consult an expert. When the expert came, he priced that dress for 500 and Imam Abu Hanifa agreed to buy it at that price. These little rules that were followed by out Imam’s are a example for us nowadays that these little things matter in business and that Allah is watching our every action. He would have bought that dress without even letting that women knowing the real value because was the one who approached first and was insisting for such a low price.

Scholars have characterized the Science of Fiqh in various words, however the basic purpose of the considerable number of definitions is to comprehend Islamic law in the light of Qur'an and Hadith. Before we comprehend the Fiqh-e-Hanafi, we have to know an essential rule that Imam Abu Hanifa set for himself. He stated, "On the off chance that I need to know a decision of Shari'ah around an issue, I first observe Qur'an and Hadith. On the off chance that that issue has not been specified in them two, I look through the actions or activities of the associates. On the off chance that it is likewise not there, I experience the Fatawa of others, and think about my very own Qiyas or Ijtihad." He additionally says, "in the event that I get a Hadith (however feeble in Sanad) on a specific issue I generally lean toward Hadith over my own Ijtihad." Imam Abu Hanifa did not make this guideline all alone record, but rather he got it from the well- known Hadith in which the Prophet (PBUH) advised to Hazrat Mu'aaz bin Jabal to do as such. Imam Abu Hanifa gained from three exceptionally insinuate students of Hazrat Abdullah bin Masood. That is the reason, the Fiqh-e-Hanafi all in all depends on his Hadiths. He was a Faqih and individuals, notwithstanding when the Prophet (PBUH) was alive, swing to him in Masa'il of Shari'ah. He taught Qur'an and Hadith in Kufa. Shaikh Alqama bin Qais and Shaikh Aswad container Yazid were his two nearest students. When he said that whatever he gained from the Quran and Hadith, he instructed to Alaqam and now his insight was close to Alqama's.

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