Trade and Finance in Islam
14 Grade 8 Religious Education (IRE) questions on Trade and Finance in Islam, with worked marking schemes. 14 questions are available on this topic in full.
Question 1
1 markIn Islamic finance, a partnership where two or more people contribute capital and share profits and losses according to agreement is known as:
A. Maysir
B. Riba
C. Ihtikar
D. Mudharabah/Shirkah
(1 mark)
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1 markA trader at the market hides the spoiled fruits at the bottom of the basket and places the good ones on top to deceive buyers. The Prophet (S.A.W.) passed by a similar heap of food, put his hand inside, found it wet, and said, 'He who deceives is not of us.' What business value does this teach?
A. Honesty and transparency in trade
B. Charging the highest possible price
C. Selling only to relatives
D. Hoarding goods until prices rise
(1 mark)
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1 markFatuma promises to sell her goat to Juma at an agreed price, then sells it to someone else offering more money. Islam condemns this because a Muslim trader must:
A. Always seek the highest bidder
B. Cancel any sale freely
C. Fulfil agreements and keep promises
D. Trade only in cash
(1 mark)
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1 markWhy does Islam prohibit riba (interest) in financial dealings?
A. It exploits the needy and creates injustice in wealth distribution
B. It reduces the value of money only
C. It makes trade too slow
D. It benefits the poor unfairly
(1 mark)
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6 marksThe Prophet Muhammad (PBUH) was known as Al-Amin (the trustworthy) in trade before his prophethood. Explain three trade qualities Muslims should learn from his example.
(6 marks)
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6 marks(a) State two conditions for a valid business transaction in Islam.
(b) Give two prohibited practices in Islamic trade.
(6 marks)
Marking scheme
(a) Any two, 1.5 marks each: mutual consent between buyer and seller; the goods must be lawful (halal) and owned by the seller; the price must be clearly agreed/known; honesty and full disclosure of defects. (b) Any two, 1.5 marks each: riba (interest); cheating in weights/measures; hoarding (ihtikar); selling prohibited goods; fraud/deception; gambling/maysir in trade. Accept any two each.
Question 7
6 marksExplain three ways in which honest trade benefits a Muslim community.
(6 marks)
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1 markWhich of the following practices is permitted (halal) in Islamic trade and finance?
A. Cheating in measurements
B. Charging riba on loans
C. Hoarding goods to raise prices
D. Buying and selling goods for an agreed, transparent price
(1 mark)
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1 markTrade is highly encouraged in Islam provided it is conducted honestly. The most important principle governing Islamic trade is:
A. Maximising profit at any cost
B. Honesty and fairness
C. Trading only with Muslims
D. Avoiding all risk
(1 mark)
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1 markHoarding essential goods to create artificial scarcity and raise prices is prohibited in Islam. This practice is known as:
A. Riba
B. Sadaqa
C. Zakat
D. Ihtikar (hoarding)
(1 mark)
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6 marksFatma runs a small shop at the local market. A customer offers to buy goods on credit, and another trader suggests she could lend money and charge extra interest to increase her profit.
(a)(i) Name the practice of charging interest that is forbidden in Islam. (1 mark)
(a)(ii) Quote evidence from the Qur'an that prohibits this practice. (2 marks)
(b) Explain three principles of honest trade that Fatma should observe in her business as a Muslim. (3 marks)
(6 marks)
Marking scheme
(a)(i) Riba (usury/interest). (1 mark) (a)(ii) "Allah has permitted trade and has forbidden riba" (Q2:275). Also acceptable: "O you who believe, fear Allah and give up what remains of riba, if you are believers" (Q2:278). (2 marks) (b) Three principles of honest trade (1 mark each): - Honesty and truthfulness – not lying about the goods; the Prophet (S.A.W.) said the truthful, trustworthy merchant will be with the prophets and martyrs (Tirmidhi). - Giving full and correct measure and weight – not cheating customers (Q83:1-3). - Avoiding deception (gharar) and concealing defects in goods; mutual consent in the sale. - Avoiding riba and selling forbidden (haram) items. (any three)
Question 12
1 markA shopkeeper deliberately hides a serious defect in a phone he is selling. Islam forbids this because a seller is required to:
A. Charge the highest price
B. Sell as quickly as possible
C. Refuse to give receipts
D. Disclose defects in the goods honestly
(1 mark)
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6 marksYusuf is starting a small business at the local market. His father reminds him that Islam permits trade but forbids riba (interest/usury).
(a) State the ruling of Islam on riba. (2 marks)
(b) Explain three principles a Muslim trader should observe to ensure his business is halal. (3 marks)
(c) Quote (in meaning) one Qur'anic verse that distinguishes trade from riba. (1 mark)
(6 marks)
Marking scheme
(a) Riba (interest/usury) is haram (strictly forbidden) in Islam. (2 marks) (b) Any three: honesty and truthfulness in describing goods (the Prophet (S.A.W.) said the truthful trader will be with the prophets); giving correct weights and measures (Q 83:1-3 warns those who give short measure); avoiding cheating, fraud and concealing defects; avoiding gharar (excessive uncertainty) and gambling; selling only halal goods; fulfilling contracts and being fair; paying zakah on wealth. (3 marks) (c) Allah says, "...Allah has permitted trade and forbidden riba (usury)..." (Q 2:275). (1 mark)
Question 14
5 marksMany Kenyan Muslims prefer Islamic (Shariah-compliant) banking.
(a) Explain why interest-based loans are avoided.
(b) State two features of a Shariah-compliant financial arrangement.
(5 marks)
Marking scheme
(a) 3 marks: Interest (riba) is forbidden by Allah because it exploits the borrower, especially the needy, and creates injustice by allowing wealth to grow without genuine trade, effort or shared risk. (b) Any two, 1 mark each: profit-and-loss sharing between the parties (e.g. mudharabah/musharakah); no charging of interest; investment only in lawful (halal) activities; risk is shared rather than placed entirely on the borrower; transactions backed by real assets/goods. Accept any two valid features.
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