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20 February 2011

Usury [الربا] Prohibited by Bible and Qur'an - Islamic Financing- Opinion-1

 الربا المحظورة من قبل الكتاب المقدس والقرآن - الحل في تمويل الإسلامي       - الرأي1
Recent economic meltdown starting form USA, engulfed the whole world, displayed the hollowness of economic system based upon capitalism where Usury is the foundation. This again proves the strength of revealed commandments in Bible and Qur'an where Usury is condemned. Islamic financial system [not based upon usury] is gaining popularity, London has become the hub of Islamic Finanical system.   
Bible, Judaism, Christianity & Usury

In modern law usury, is the practice of charging an illegal rate of interest for the loan of money. In Old English law, the taking of any compensation whatsoever was termed usury. According to known records, Usury has been practiced in various parts of the world for at least four thousand years.  During this time, there is substantial evidence of intense criticisism by various traditions, institutions and social reformers on moral, ethical, religious and legal grounds.  The rationale employed by these wide-ranging critics have included arguments about work ethic, social justice, economic instability, ecological destruction and inter-generational equity.  Presently the world economic system is based upon interest and usury, the recent collapse of capitalist system in USA had adverse effects at global level. Hence the significance of this menace is greater than ever before in the context of the modern interest-based global economy.
Among the Ancient Western philosophers who condemned usury can be named Plato, Aristotle, the two Catos, Cicero, Seneca and Plutarch (Birnie, 1958).  Evidence that these sentiments found their concurrent manifestation in the civil law of that period can be seen, for example, from the Lex Genucia reforms in Republican Rome (340 BC) which outlawed interest altogether. Nevertheless, in practice, ways of evading such legislation were found and by the last period of the Republic, usury was once again rife.  It was the Democratic party in Rome who rededicated themselves to the cause of those suffering the burden of debt, and under the banner of Julius Caesar, a ceiling on interest rates of 12% was set, and later under Justinian, lowered even further to between 4% and 8% (Birnie, 1958).  Clearly, this left fertile ground for the assault on usury which the Church would mount following its Christianisation of the Roman Empire.
With the expansion of trade in the 13th century, however, the demand for credit increased, necessitating a modification in the definition of the term. Except for Genesis 23:9, Jeremiah 32:10, and Ruth  4:8, Scripture makes no reference to transaction procedures. Interest is however prohibited in Bible: Take no interest from him or increase, but fear your God; that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”(Leviticus 25:39-37)
 "You shall not charge interest on loans to another Israelite, interest on money, interest on provisions, interest on anything that is lent. On loans to a foreigner you may charge interest, but on loans to another Israelite you may not charge interest, so that the Lord your God may bless you in all your undertakings in the land that you are about to enter and possess." (Deuteronomy 23:19-20). The violation of this law was viewed as a great crime:"
who do not lend money at interest, and do not take a bribe against the innocent. 
Those who do these things shall never be moved."
(Psalms 15:5; Peter; 28:8; Jeremiah 15:10). After the Return, and later, this law was much neglected (Nehemiah 5:7,10). The Jews consider that usury is prohibited with in Jews and that they could charge interest  from gentiles: “Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.”(Deuteronomy 23:20). Thus the Jews became to be known as money lenders, hated by the masses in Europe due to their exploitation by Jews who charged the interest at exorbitant rates. 
In the Middle Ages the Christian Church attempted to enforce certain moral commands adverse to commercial transactions. The taking of interest for loans of money was considered income without true work and, therefore, sinful and prohibited. There was also an attempt to generalize the idea of a just price. Although both rules, and especially the former, influenced the law and the economy for centuries, neither of them finally prevailed in the secular world. The growth of finances, industry, and land estate ruled the rabbis to develop laws concerning contracts, partnerships, and legal arrangements to circumvent the biblical prohibition against usury. 
A series of modes of transaction effecting the transfer and acquisition of property evolved. Usury then was applied to exorbitant or unconscionable interest rates. In 1545 England fixed a legal maximum interest; any amount in excess of the maximum was usury. The practice of setting a legal maximum on interest rates later was followed by most states of the United States and most other Western nations. Islam provides solution to this financial exploitation.
“Your wealth and your children are but a trial. It is Allah with Whom is the greatest reward.”(Qur’an 64:15).
Defining Usury (Riba): Riba (literally ‘usury’ or ‘interest’) is prohibited in Islam, for the principle is that any profit sought should be through own exertions and at our own expense, not through exploiting other people or at their expense. The Arabic term Riba is considered synonymous to ‘usury’ which has been defined in the writings of a number of very early Muslim scholars, it may help to understand its broader meanings. In his commentary on the Qur'an, Imam Al-Razi says: "The usury based on time delay was the type commonly practiced in pre-Islamic days. A man would lend another person some money for a specified term stipulating that he would charge him a specified amount every month while the principal amount remained intact. When the agreed time arrived, the lender would request repayment. If the borrower cannot pay, he increases the monthly payment and the time of the loan." Al-Jassas says: "It is well known that usury in pre-Islamic days was simply a loan given for an appointed time with a stipulated increase. That increase compensated for delay. This is prohibited by Allah." Mujahid says: "In pre-Islamic days, when a man had borrowed money from another, he would come to him and say: I will pay you so and so if you allow me a longer period for repayment." Qatadah says: "The usury practiced in pre-Islamic days took the form of a sale made for a specified term. When payment is due and the buyer does not have the money to pay the seller, he agrees to pay him extra in return for a postponement." Imam Ahmad ibn Hanbal defines usury in the same terms, saying: "If a man had lent money to another and the time of repayment was due, the lender would say to the borrower: You either pay me now or increase the amount to be paid. If he does not settle the debt then and there, one agrees to increase the amount and the other extends the time for repayment." All these definitions agree on the nature of usury. It is financial compensation for time delay. This is what is known as "increase in lieu of time extension." All scholars and all Muslim schools of thought are unanimous that this type of Riba is strictly forbidden. However as regards to the other explanations of Riba (Usury) there is room for difference of opinion. 'Umar bin Al-Khattab, (2nd rightly guided Caliph) according to Ibn Kathir, felt some difficulty in the matter, as the Apostle left this world before the details of the question were settled. Riba (Usury) was one of the three questions on which he wished he had more light from the Prophet (peace be upon him). Muslim scholars, ancient and modern, have worked out a great body of literature on Riba, based mainly on economic conditions as they existed at the rise of Islam.
Increase in Lieu of Quality: There is another type of Riba, which is known as "increase in lieu of quality". This takes the form of exchanging two quantities of the same kind, such as dates for dates, wheat for wheat, rice for rice. A person may offer 1.5 kilogram of dates or wheat or rice, etc. in return for one kilogram of the same type but of higher quality. There is no doubt that there may be several types of the same produce and their qualities differ immensely. Prices could range from the very cheap to the very expensive, with the latter being two or three or four times as much as the price of the former. It is conceivable that people would like to barter some of their produce for a smaller amount of a higher quality type. But this again is forbidden in Islam as evident from Hadith of Prophet Muhammad(peace be upon him); Narrated by Abu Said al Khudri: Once Bilal brought Barni (i.e. a kind of dates) to the Prophet and the Prophet asked him, "From where have you brought these?" Bilal replied, "I had some inferior type of dates and exchanged two Sa’s (measurement of weight) of it for one Sa of Barni dates in order to give it to the Prophet (peace be upon him) to eat." Thereupon the Prophet(peace be upon him)  said, "Beware! Beware! This is definitely Riba! This is definitely Riba! Don't do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money."(Sahih Al-Bukhari Hadith 3.506). Narrated by Ibn Umar: At an other occasion the Prophet (peace be upon him)  said; "The selling of wheat for wheat is Riba except if it is handed from hand to hand and equal in amount. Similarly the selling of barley for barley, is Riba except if it is from hand to hand and equal in amount, and dates for dates is usury except if it is from hand to hand and equal in amount. (Sahih Al-Bukhari Hadith 3.379).

Modern Banking Transactions: While there are some differences between such usurious practices and banking transaction in today’s world; but there are also essential similarities. In a loan obtained from a bank, a borrower pays a regular amount of interest, which does not affect the principal. This is similar to the practice of pre-Islamic days when a borrower used to pay every month a certain sum to the lender, while the principal remained the same. Moreover, in a banking transaction, when the loan is repaid over a longer period of time, the amount of interest charged is also higher, although its rate may remain the same.
Strict Prohibition of Riba in Qur’an:
It should be well understood that there is no case of prohibition stated in the Qur'an more forcefully than the prohibition of Riba. Allah warns the believers that they must desist from practicing usury or they would face a war declared on them by Allah and His messenger(peace be upon him): “O You who believe! Fear Allah and waive what is still due to you from usury if you are indeed believers; or war shall be declared against you by Allah and His Apostle. If you repent, you may retain your principal, causing no loss to debtor and suffering no loss.”(Qur’an;2:278-279). However some eminent scholars have argued that banking transactions and the system of interest is different from Riba as called in Islam.
The Islamic law of transactions as a whole is dominated by the doctrine of prohibition of  Riba. Basically, this is the prohibition of usury, but the notion of Riba was rigorously extended to cover, and therefore preclude, any form of interest on a capital loan or investment. And since this doctrine was coupled with the general prohibition on gambling transactions, Islamic law does not, in general, permit any kind of speculative transaction the results of which, in terms of the material benefits accruing to the parties, cannot be precisely forecastThe charging of interest is strongly prohibited according to Qur’an; “Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness.  That is because they say: "Trade is like usury but Allah hath permitted trade and forbidden usury.  Those who after receiving direction from their Lord desist shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the fire: they will abide therein (for ever)”.(Qur’an;2:275). “Allah will deprive usury of all blessing but will give increase for deeds of charity: for He loveth not creatures ungrateful and wicked.”(Qur’an;2:276). “That which ye lay out for increase through the property of (other) people will have no increase with Allah: but that which ye lay out for charity seeking the Countenance of Allah (will increase): it is these who will get a recompense multiplied.”(Qur’an;30:39). Prophet Muhammad (peace by upon him) reemphasized the abolishment  of usury in his Last Sermon at Hajj, he said;” All usury transactions, which have been made in the past days of ignorance, are hereby abrogated. You may claim only your capital, neither inflicting nor suffering any injustice. Allah has decreed that no usury is permissible. The first usury transactions I abrogate are those of my uncle, Al-Abbas ibn Abdul Muttalib,”. In some Muslim countries efforts are being made to replace the ‘Interest’ with Islamic compliant substitutes.
Interpretations of Riba: Owing to the fact that interest occupies a central position in modern economic life, and specially since interest is the very life blood of the existing financial institutions, a number of Muslims have been inclined to interpret it in a manner which is radically different from the understanding of Muslim scholars through last fourteen centuries and is also sharply in conflict with the categorical statements of the Prophet (peace be on him). According to Islamic teachings any excess on the capital is Riba (interest). Islam accepts no distinction, in so far as prohibition is concerned, between reasonable and exorbitant rates of interest, and thus what came to be regarded as the difference between usury and interest; nor between returns on bonus for consumption and those for production purposes and so on.  Hence the Islamic mode of Riba free banking, is gaining popularity. In Islam the basic principles of the law are laid down in the four root transactions of (1) Sale (bay'), transfer of the ownership or corpus of property for a consideration; (2) Hire (ijarah), transfer of the usufruct (right to use) of property for a consideration; (3) Gift (hibah), gratuitous transfer of the corpus of property, and (4) Loan ('ariyah), gratuitous transfer of the usufruct of property. These basic principles are then applied to the various specific transactions of, for example, pledge, deposit, guarantee, agency, assignment, land tenancy, partnership, and waqf foundations. Waqf is a peculiarly Islamic institution whereby the founder relinquishes his ownership of real property, which belongs henceforth to Allah, and dedicates the income or usufruct of the property in perpetuity to some pious or charitable purpose.
Inflation and Riba: Inflation is the very real problem, which makes it difficult for anyone to advance money to another for a period of time without making a loss on transaction. That not only apply to a loan given to another person, but also to money kept in a current account, which pays no interest. Any form of saving which does not give returns, is a losing value because of inflation. There must be no injustice, perpetrated or suffered. That is the divine order stated clearly in the Qur'an: “You shall inflict no injustice and shall suffer none.”(Qur’an;2:279), “O my people! Give full measure and weight in all fairness. Do not defraud people of their goods and do not spread mischief in the land.”(Qur’an;11:85).  All this requires thorough study so that scholars are able to come up with answers to present-day problems, instead of applying the rulings of earlier scholars to later problems. Using interest to offset the drop in money value caused by inflation has some merit. Here the purpose is to maintain the real value of what a person has. The question is whether it is permissible to do that or not. This is a very difficult question and scholars have not come up with a definitive ruling on this point. The problem will remain until a satisfactory answer is found to ensure fairness to investor, lender and borrower, without exploitation.
Types of Riba- Thoughts & Opinions:
There are scholars who argue that fixing a guaranteed rate of returns in advance is acceptable because it protects the interest of the individual investor. The rector of Al-Azhar has come strongly in favour of this method. Dr Riazul Hasan Gillani, holds doctorate from Al-Azhar University according to him: Certain kinds of Riba were considered undesirable(makrooh) but not prohibited according to Fatawa Alamgiry &  Imam Abu Hanifa. There were three kinds of Riba, and with the exception of one form, the remaining two were undesirable (makrooh) but not prohibited(haram). The three forms of Riba were Riba Uddain (Debt: Something owed, such as money, goods, or services) Ribaul Qarz (Loan: Something lent for temporary use)  and Ribaul Fazal, the Holy Prophet (peace be upon him) prohibited Riba Uddain (Debt) through a decree but did not enforce it on the two forms which were declared undesirable(makrooh) but not prohibited(haram). Dr Gillani elucidates that under Islamic injunctions a woman’s demand for divorce is undesirable (makrooh) but if she insists, it could not be denied to her. If somebody dealt in makrooh Riba, he was not committing a sin. The believers were advised to avoid makrooh Riba, but not prohibited as they were from Riba Uddain (Debt). 
According to Sheikh Al-Azhar Dr. Syed Mohammad Tantawi, a prominent modern-day jurist opines that, the government savings schemes do not fall into the category of Riba at all, because these are investment schemes and not Qarz  schemes. Among the other scholars who think that the interest is different from usury, most notable is Dr. Ma’roof Ad-Dawaleebi, who is a scholar of high repute and who has been involved in politics, being former prime minister in Syria and an advisor to the king of Saudi Arabia for many years. Earlier he has been a professor of law in the University of Damascus. This has given him the very important mix of looking for practical solutions and a high standard of scholarship.
Eminent Pakistani scholar, Javed Ahmad Ghamidi views usury as an evil which  is fully integrated in the present international financial system. It should be replaced by Islamic financial system at least in the Muslim societies, till then one should avoid it as far as possible. However, under unavoidable circumstances one have to live with this evil as was the case of slavery, which was gradually phased out. He argues that while there is prohibition of taking Riba, there is no restriction of paying extra on loan because the loan is taken under necessity or compulsion, according to him, Qur’an and Hadith forbids taking Riba or assisting in collection of Riba. Taking lead from the Qur’anic doctrine of necessity, whereby the prohibited (Haram) becomes temporarily permissible under certain extreme conditions;  “…But (even so) if a person is forced by necessity without willful disobedience nor transgressing due limits thy Lord is Oft-Forgiving Most Merciful.”(Qur’an;6:145), he opines that the widows, orphans, sick, retired elders who have no other source of income may invest in government saving schemes to get subsistence to survive.
All Types of Interest, Riba Forbidden: The majority of Islamic scholars still consider all types of interest as Riba, hence forbidden.  “...There is none who can change His words..”(Qur’an;18:27). There is no doubt that Riba is prohibited, but there was some thing about Riba which even 'Umar bin Al-Khattab wanted to know more form  Prophet (peace be upon him) before he left the world. Till Ummah develops a consensus on the serious issue of defining the Riba, the advice of Prophet Muhammad (peace be upon him) be followed, who advised the Muslims to consult their hearts after having studied a matter carefully.  
We are lucky to live in the era/environments, where option of Islamic Banking and Islamic Finance are available, so it is very convenient to avoid Riba.

"ويعرف شعبيا الفائدة كما \"ثمن\" من رأس المال أو على نحو أدق مع عودة والدخل والأرباح أو أرباح يجنيها هذا عامل مهم من الإنتاج. بما أن رأس المال يحدث أن تكون أكثر الفئات غير المتجانسة ، فضلا عن عامل الوقت ومقرها معدل العائد وهي سعر الفائدة لديه واسعة التنوع والتعددية و."
Riba prohibited in the Holy Quran in clear terms refers to all types of illegal income and illegitimate earnings from sources such as corruption, bribery, fraud, exploitation, rent-seeking and so on.

Interest Riba, Divorce, Innovation in mosque...

The Prohibition of Riba Part 1

All credits to Sheikh Imran N Hosein. It is about time muslims wake up and understand the truth about the world economy. We are so backward today .

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  1. http://peace-forum.blogspot.com/2011/02/prohibition-of-riba-usury-in-sharia.html
  2. Shari’a: The Islamic Law: http://wp.me/PCgrB-8L
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