Trade and Finance in Islam
12 Grade 9 Religious Education (IRE) questions on Trade and Finance in Islam, with worked marking schemes. 12 questions are available on this topic in full.
Question 1
1 markWhich of the following is a condition for a valid sale (bay') in Islam?
A. Mutual consent of both parties
B. The item must be sold on credit
C. The price must include interest
D. The seller must be a relative
(1 mark)
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1 markA partnership where one partner provides capital and the other provides labour/skill, sharing profits by agreement, is called:
A. Mudarabah
B. Riba
C. Gharar
D. Maysir
(1 mark)
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1 markA joint-venture partnership in which two or more partners contribute capital and share profits and losses is known as:
A. Musharakah
B. Riba
C. Iddah
D. Maysir
(1 mark)
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6 marksMr. Otieno offers Halima, a young Muslim businesswoman, a loan of Ksh 100,000 on condition that she repays Ksh 130,000 after one year, the extra amount being fixed regardless of her profit or loss. He also suggests that, instead, he provides the capital while she runs the trade, and they share the actual profits and losses.
(a) Identify the prohibited element in the loan offer and give ONE Qur'anic reference forbidding it. (3 marks)
(b) Name the Islamic partnership Mr. Otieno suggested and explain why it is permissible. (3 marks)
(6 marks)
Marking scheme
(a) The prohibited element is riba (interest/usury) - the guaranteed fixed extra of Ksh 30,000 over the principal, owed regardless of outcome. Reference: Q2:275 - 'Allah has permitted trade and forbidden riba,' OR Q3:130 - 'O you who believe! Do not consume riba, doubled and multiplied.' (2 marks for naming riba with explanation; 1 mark for a correct reference.) (b) Mudarabah - where one party (Mr. Otieno) supplies the capital and the other (Halima) provides the labour/management, sharing profit by an agreed ratio while financial loss is borne by the capital provider. (Accept musharakah where both contribute capital and share profit and loss proportionally.) It is permissible because the return is tied to the real outcome of the trade, not guaranteed in advance, so risk is genuinely shared and neither party exploits the other - which is the lawful basis of trade (bay'). (3 marks.)
Question 5
6 marksA Muslim youth in Nairobi wishes to open a business. Describe the ethical principles he should observe to ensure his trade is conducted in a halal manner.
(6 marks)
Marking scheme
Any six (1 mk each): honesty/truthfulness in describing goods; fair pricing (no exploitation/hoarding); avoid interest (riba); avoid cheating in weights and measures; mutual consent in transactions; sell only lawful (halal) goods; avoid deception and hidden defects (ghish/gharar); fulfil contracts and pay debts; pay Zakat on wealth; treat customers with courtesy. Award 1 mk per point up to 6.
Question 6
5 marks(a) Define the term 'Mudarabah'.
(b) State two differences between Mudarabah and a conventional interest-based loan.
(5 marks)
Marking scheme
(a) Mudarabah is a profit-sharing partnership where one party provides capital (rabb al-mal) and the other provides labour/expertise (mudarib), sharing profit by an agreed ratio while the capital provider bears the loss (2 mks). (b) Two differences (1 mk each): Mudarabah shares profit and risk while a loan guarantees fixed interest regardless of outcome; in Mudarabah loss is borne by the capital provider while in a loan the borrower bears all liability; Mudarabah is halal, interest loan is haram. Total 5 marks.
Question 7
1 markA businesswoman is offered a loan that requires her to pay back more than she borrowed as fixed interest. As a Muslim, she refuses. Which prohibition is she avoiding, forbidden in Surah Al-Baqarah (2:275)?
A. Zakat
B. Riba (interest/usury)
C. Sadaqah
D. Halal trade
(1 mark)
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Create a free account to see itQuestion 8
1 markA trader in Eastleigh hides a serious defect in goods he is selling. This transaction is unlawful because it involves:
A. Halal profit
B. Deception/cheating (ghish)
C. Sadaqah
D. Zakat
(1 mark)
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1 markExcessive uncertainty or ambiguity in a business contract that makes it unlawful in Islam is termed:
A. Mudarabah
B. Amanah
C. Gharar
D. Musharakah
(1 mark)
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1 markThe charging or paying of interest on loans, which is strictly forbidden in Islam, is known as:
A. Sadaqah
B. Zakat
C. Riba
D. Mudarabah
(1 mark)
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Create a free account to see itQuestion 11
1 markA trader at the market mixes spoiled grain at the bottom of the sack and good grain on top so buyers cannot see the defect. A scholar passing by reminds him of the Prophet's teaching about hiding defects in goods. What is the ruling on his action?
A. It is permissible as long as he makes a profit
B. It is haram because concealing defects is a form of deception in trade
C. It is recommended to maximise sales
D. It is only disliked but causes no sin
(1 mark)
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6 marksExplain the reasons why Islam prohibits Riba (interest).
(6 marks)
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