ISLAMIC BANKING AND FINANCE– EXCHANGE OF VALUES (BAI’)

Literally, Bai‘ means exchange of one thing with another; one thing being the subject matter (Mabi‘) and the other being price (Thaman). The Majallah, a code of Islamic commercial law based on the Hanafi Fiqh, defines a sale as “the exchange of property for property”, and in the language of the law, it signifies an exchange of property for property with mutual consent of the parties, which is completed by declaration and acceptance.3 Legally, Bai‘ refers to giving ownership of a commodity to another person in compensation of the other commodity. The seller gives ownership of the commodity to the buyer on a permanent basis in exchange for the price.

The word Bai‘ in its widest meaning stands for any bilateral contract. In that sense, a simple word for Bai‘ would be “exchange”. This may involve all types of business and any exchange. But all exchanges that lead to Riba are unanimously prohibited. This is why, contracts for interest-based loans are excluded from the definition of valid Bai‘ according to the jurists.4 Similarly, exchanges based on Gharar or absolute uncertainties are void. The literature of Hadith and Fiqh contains mention of many types of Bai‘ that have been prohibited by the holy Prophet (pbuh). The common factor of all such prohibited types is that they contained the elements of Riba, deception and/or Gharar. A sale, to become valid, must be free from all false and prohibited practices.

Different exchanges involve different rules in respect of the liabilities and benefits for the parties to exchange, ownership rights, etc. Exchange in the form of trading involves the reciprocal exchange of property rights along with usufruct. In Ijarah, which is termed the sale of usufruct, the lessor gives usufruct against rental but retains ownership along with the liabilities relating to ownership. In loans, there is a temporary but complete transfer of ownership (along with usufruct) to the borrower, who can use the loaned item like his other possessions, but he has to give it back. Shirkah involves sharing of ownership and benefit/loss among the partners.

(Image courtesy: AIMS Institute of Islamic banking and finance taken from the books of Islamic finance course and diploma in Islamic banking and finance)

In trade, as soon as a sale agreement takes place, ownership of the subject matter is transferred to the buyer, irrespective of whether he has made a cash payment or has to pay in the future according to an agreed schedule. In the latter case, the buyer is liable to pay the agreed price and not the commodity. In a loan, the item/commodity of loan is transferred to the borrower and he gets ownership of the item with full discretion about its use. But he has to repay a similar item/commodity or the money.

While Riba-based loaning involves the definite right of return, Bai yields risk-based return. In other words, “risk and reward” is an essential ingredient of trade, which is inherent in all trading activities. A transaction becomes usurious if it involves an exchange of two counter values such that ownership in the item exchanged is passed on to the other party who has to repay it with any excess; e.g. if A gives $1000 to B for his use and B uses it for consumption or in his business and then returns $1000 to A, it will be a loan transaction; it will become usurious if A is required to pay any extra amount, $1050 for example.

Accordingly, rules are specific to every exchange (these have been explained in Chapter 4). A trade transaction requires the transfer of complete and instant ownership that is irreversible once finalized. It means that the seller excludes the commodity from his ownership and gives it to the buyer on a permanent basis, while in loans, ownership is transferred for a specified period and exactly its similar has to be paid back.

When the genera of the goods to be exchanged in trading are different, delivery of one of the exchanged items can be delayed, as in a credit sale or as in advance payment for purchase of wheat through Salam. If gold or any currency is exchanged for wheat or any other commodity, there is no Riba; if wheat is exchanged for barley, Riba is found if delivery of one is delayed, because they are species of the same genus. Loan transactions, on the other hand, have to be executed on an equal basis for the purpose of repayment. All banking transactions are covered under this rule and their unequal exchange is tantamount to Riba. Therefore, as conventional banks deal in money, their transactions cannot be termed as Bai‘ in the strict sense.

Exchange of values as define in institute of Islamic banking and finance is going wrong a bit in most of the Islamic banking courses or certificate in Islamic finance classes. I personally read most of the books of Islamic finance certification and diploma Islamic finance which was giving definition of salam in the heading of Bai’ which is totally different so I decided to clear this point and changed the definitions in my certificate in Islamic banking and diploma in Islamic finance books.

In this respect, renowned Hanafi jurist Sarakhsi says: “Trade is of two kinds: permitted (Halal), which is called Bai‘ in the law; and prohibited (Haram), which is called Riba. Both are types of trade. Allah Almighty informs us, through the denial of the disbelievers, about the rational difference between exchange (Bai‘) and Riba, and says: ‘That is because they said Bai‘ is like Riba’. Almighty, then, distinguishes between prohibition and permission by saying: ‘And Allah has permitted sale and prohibited Riba’.”9 Therefore, contemporary Muslim scholars also do not include loaning in the meaning of the term Bai‘, particularly

because present-day money is fiat money and not bullion money that had intrinsic value and that was traded in the past in addition to serving as a medium of exchange.

When to Cancel a Project – Project Management

Not every bright idea is a good idea. Not every good idea is worth doing. Not every idea that is worth doing can or should be done right now. As you plan, and especially at the preparation review gate, you should consider canceling the project. Why? Because it makes no sense to throw good money after bad. If a project can’t be done, the sooner you stop it, the sooner you quit wasting precious time and money.

It’s hard to give up on a plan. It hurts the ego. But, ultimately, we have to choose between our egos and our business. If we are humble enough to admit that our idea is bad or that we are overwhelmed and don’t have what it takes to do a project right now, then we can stop the project and use our time and money well. If not, we’re headed for humiliation, for failure, and for bigger problems with our company. We’re a lot better off deciding what’s good for our business than we are just plowing ahead trying to make a bad idea work.

(Image Courtesy: AIMS Project Management Academy image taken from project management courses and diploma in project management lectures)

When we review a project, we should go ahead only if we are confident of success. If we see problems we can’t solve, it’s time to stop or at least pause. When we pause, our next step depends on the size of the problem:

• For a small problem, get some expert help or do some brainstorming and think outside the box. If you can come up with a solution, add it to your plan and roll through the preparation gate.
• For a medium-sized problem, ask what you need to fix the problem. Sometimes, waiting is enough. Maybe you and your team are just too busy to do this right now. Maybe you need to hire someone with the right skills. Maybe you need to do another project first—like catching up on last year’s bookkeeping and taxes before you plan next year’s budget. Plan a way to get from where you are to a point where you can make this project work.
• For a big problem, be ready to cancel the project, before the project cancels your business.

Preparation is the most important part of any project, so we’ll discuss the preparation stage in Chapters 4 through 12. If we pass through the preparation review gate, we start doing the work and tracking our progress.

We’ll discuss that in detail in Chapters 13 through 18. When we’ve done all the work in our plan, we’re almost finished with the project. But there are three more steps: the doing gate, the follow-through stage, and the follow-through gate.

The doing gate is where we check that we did everything and that everything works. We make sure our product and we are fully ready for the customer. In follow-through, we deliver the project results to the customer: we handle delivery, installation, and training. In the follow-through gate, we ensure project completion and customer delight. So far, we’ve looked at a project from beginning to end. We’ve looked at the stages and gates of project management in time. Now, we’re going to shift our perspective. We’re going to look across a project—what are all the things we need to manage? Those are defined in the nine areas of project management.

When I was teaching in my project management institute I gave that lecture for my students of project management certification during my project management training session. Now I am doing job as a certified project manager in a company and teaching students in a part time to masters in project management, diploma of project management students and other friends who are related to project management qualifications so I thought that I should share this core and very useful lecture for professionals and students.