As we all know, Islam have their own regulations that needs to be followed. So, to build Islamic capital market, there are a few elements that need to be eliminated from the current capital market. Based on primary sources and secondary sources, Islam prohibited Riba’, Ghara, Maysir, Tala’ub, Ihtikar, Najsh, and Tadlis. Islam prohibited these elements because they bring harm to the society, also to the circulation of economy and others else.
Riba is derived from the verb raba that means to grow, expand, increase, inflate or excess. However, the term riba’ today has been changed to a new term such as interest. The excess in quantity, amount or addition above their actual is called riba' or interest. Riba’ not only happen in the shape of money, but also can be in items. The first level of prohibited Riba’ is in Al-Quran, Surah Ar-Rum verse 39.
وَمَآ ءَاتَيْتُم مِّن رِّبًۭا لِّيَرْبُوَا۟ فِىٓ أَمْوَٰلِ ٱلنَّاسِ فَلَا يَرْبُوا۟ عِندَ ٱللَّهِ ۖ وَمَآ ءَاتَيْتُم مِّن زَكَوٰةٍۢ تُرِيدُونَ وَجْهَ ٱللَّهِ فَأُو۟لَـٰٓئِكَ هُمُ ٱلْمُضْعِفُونَ ٣٩
“Whatever loans you give, ˹only˺ seeking interest at the expense of people’s wealth1 will not increase with Allah. But whatever charity you give, ˹only˺ seeking the pleasure of Allah—it is they whose reward will be multiplied.”
For example, riba' or interest charge in bonds. The product is created by the originator in order to get funds from the investors. The fund is used in projects or business. Riba happens when the originators need to pay interest charged by the investors, as payment for the investor's willingness to lend money to the issuer.
Secondly, gharar. Gharar means uncertainty, hazard, risk and deceit. For gharar, if the degree of uncertainty is low thus it is tolerable and do not prohibited by Islam. But, if the uncertainty are excessive or in Islam it is called as gharar fahish, and the unceertaintyy is uncontrollable which leads to speculation and gambling it must be avoided. In Islamic Capital market, the presence of gharar in the products can make the dividend or earnings by the investors become illegal or haram. Therefore, as an Islamic investors, we must avoid gharar and understand all of the product's information before investing in it. Based on the hadith reported by Ibn' Umar RadiAllahhu Anhu: The Messenger of Allah forbade sales that involve gharar. (Sahih Muslim, hadith no. 1513). For example, investors normally assume that they will be able to make profits by having heavy speculations on an overpriced stock or market. The excessive speculation can affect the currency, and also lead to financial crises. This is because there is uncertainty over underlying assets bought and sold as well as regarding size.
Thirdly is maysir. Maysir means any activity that involves betting, whereby the winner will take the entire bet and the loser will lose his bet. Maysir also prohibited in Islam because it creates wealth from chance instead of productive activity. Maysir usually played for its own sake and often as a game. Why Maysir was prohibited by Islam.? This is because, by gambling the participant is gaining something by chance rather than productive effort. As we all know, Islam really value’s someone effort. Based on surah Al-Maidah, verse 90. Maysir is strictly prohibited :
يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَـٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَـٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ
“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al-Ansab, and Al-Azlam (arrows for seeking luck or decision) are an abomination of Shaitan's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.”
For example, an investor wants to invest in stock because he speculates that he can get the benefit within short-term, but when doing investment in stock actually the investors need to be patient because stock is a long-term investment.
Lastly, the elements of Tala’ub, Ihtikar and Tadlis also prohibited by some of contemporary Muslim jurists. These elements which lead to deception and injustice are considered elements or techniques of manipulation. Technically, Ihtikar means acquiring and storing essential commodities such as food in anticipation of a price increase. While the term ‘tadlis’ is derived from the root word ‘dallasa’ which means “to swindle or cheat”. Which can mean concealing, deceiving or hiding. In Islamic transaction or sale, Tadlis is an act of intentional concealment of the goods’ defect in a sale transaction by the seller. Thus, the sale contract is valid.
In conclusion, Islamic capital market should not have these prohibited elements in order to get blessed by Allah s.w.t. As the saying goes by, the goal does not legitimize the manner. Even though in the eyes of other people, Islamic Capital Market is much more difficult, it is safer than the conventional capital market.
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