The Quran and Sunnah formulates the basic principles of our lives. The two sources of sharia places boundaries on our day to day transactions and dealings. Islamic Economic System is established on the prohibition of injustice. In that context, Riba is considered as an act of injustice. In the Quran, ‘Ar-Riba’ means ‘excess’. Under sharia law, riba is the measure of excess in the event of exchange of 2 things in a bargain or an increase in the amount of loan while repaying. Riba is a grievous sin in Islam. In sharia law, riba is criminal and illegal. It is linked with injustice, oppression, exploitation and inequality. It exploits the needs of people and it creates a room for selfishness. In areas where riba is practiced, people see it as their right. They can’t comprehend the idea of giving loan without interest while under sharia, it is encouraged to give loan to the needy, encourages us not to ask our money back from the needy in the event of hardship and further encourages us to forgo the loan as a form of charity incase the borrower is unable to pay back.
There are two types of riba; Riba Al-Fadhl (when one takes excess in exchange of one commodity in exchange for two similar commodities) and Riba An-Nasee’ah (when 2 people exchange same kind of items but one or both of them delay in his/her payment). The bigger amount is a fixed value after some period of time. Under sharia assets are of 2 classes; the ‘commodity’ and its ‘price’ for exchange.
‘Riba in the light of Quran and Sunnah’
1. ‘That which you give as riba to increase the peoples wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold’. ‘(Surah al-Rum, verse 39)’
2. ‘And for their taking riba even though it was forbidden for them, and their wrongful appropriation of other people’s property, we have prepared for those among them who reject faith a grievous punishment’. ‘(Surah al-Nisa', verse 161)’
3. ‘O believers, take not doubled and redoubled riba, and fear God so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey God and the Prophet so that you may receive mercy’. ‘(Surah Al 'Imran, verses 130-2)’
4. ‘Those who believe, perform good deeds, establish prayer and pay the zakat, their reward is with their Lord; neither should they have nay fear, nor shall they grieve’. ‘(277)’
5. ‘O believers, fear God, and give up the riba that remains outstanding if you are believers’. ‘(278)’
‘From Jabir: The Prophet, may peace be on him, cursed the receiver and the payer of riba, the one who records it and the two witnesses to the transaction and said: They are all alike [in guilt] (Muslim, Kitab al-Musaqat)’
B. ‘Riba al-Nasi'ah’
From Anas ibn Malik: ‘The Prophet, peace be on him, said: If a man extends a loan to someone he should not accept a gift’. ‘(Mishkat)’
C. ‘Riba al-Fadl’
From Umar ibn al-Khattab: ‘The last verse to be revealed was on riba and the Prophet, peace be on him, was taken without explaining it to us; so give up not only riba but also riba’ ‘(Ibn Majah. op. cit.)’.
D. ‘Riba in Fiqh’
Shah Wali-Allah Dihlawi said; ‘Remember that riba is of two kinds: One is primary (haqiqi), the other is subject to it. Primary riba is only on loans. The other riba is called riba al-fadl and is akin to primary riba’. ‘(Hujjat Allah al-Balighah, Lahore: Qawmi Kutub Khana, 1953, tr. Mawlana Abdul Rahim, vol. 2, pp. 474-5)’
‘Comparison of three Economic Systems’
Under capitalism, to economic afloat, there is a need to promote large scale buying and consumption in order to generate wealth. Stock trading, insure and banking based on riba are critical elements for the survival of capitalism.
Ownership is common under communism (non-individual ownership). Members don’t earn profit but they get paid for their services. It doesn’t rely on riba as individuals are not the owners.
Islamic economic system provides a balanced approach between the 2 systems above. Individuals have rights of ownership including women. There is a freedom to spend wealth under strict ethics and guidelines under the sharia law. Despite the fact that individuals are entitled to their wealth they are still obliged to give money to the needy and families in the form of zakat, sadaqat and inheritance to ensure the equitable distribution of wealth and avoid hoarding of wealth.
ARGUMENTS FOR OR AGAINST THE PROHIBITION OF RIBA
Some people claim that the interest that is forbidden is not the modern day interest but the one during the jahiliyya period. During the time of the prophet(s), people were affected by riba when they try to borrow money for the personal use, commercial banking did not exist as at that time. They claim that interest on commercial banks is not prohibited. This claim has been dismissed by the ulama.When one pays interest on a loan, it is added to the cost of goods and this in turn increases the price of goods and hence negatively affect the purchasing power of the masses. For this reason alone Islam prohibited riba being the largest form of extortion, tyranny and suppression.
Sharia views riba as a serious form of oppression and injustice. Hence the prohibition of riba and encouragement of giving out charity. Under sharia, riba is also seen a means of hoarding money by the strong and mighty hence the warning to those that accumulate wealth in this cause. Sharia implemented laws of charity, inheritance and zakat.
Abu Zahrah, M. (1970), Buhuth fi al-Riba (Kuwait: Dar al-Buhuth al-Islamiyyah).
Baljon, J.M.S. Jr. (1964), The Reforms and Religious Ideas of Sir Sayyid Ahmad Khan (Lahore: Sh, Muhammad Ashraf, 3rd ed)
Bokare, G.M., (1993) Hindu-Economics: Eternal Economic Order (New Delhi:
Chapra, M. Umer (1985) Towards a just Monetary System, (Leicester, U.K.: The
Chapra, M. Umer, and Tariqullah Khan, Regulation and Supervision of Islamic Banks, Occasional Paper No. 3 (Jeddah: IRTI/IDB, 2000).
Council of Islamic Ideology (Pakistan) (1980), Elimination of Interest from the
Economy (Islamabad: Government of Pakistan).
Federal Shariat Court (Pakistan) ((1992), Federal Shari‘ah Court Judgment on
Interest (Lahore: P.L.D. Publishers).
Johns, C.H.W, John Dow, W.H. Bennett and J. Abelson (n.d.), On the Babylonian,
Christian, Hebrew and Jewish views respectively on “Usury”, Encyclopedia of
Religion and Ethics (New York: Charles Scribner’s Sons), vol. 12, pp. 548-58.
Katouzian, Homa (1979), “Riba and Interest in an Islamic Political Economy” in
Peoples Mediterranean, March, pp. 97-109).
Khan, M. Ali (1992), his review of the book edited Mohsin Khan and Abbas Mirakhor (1987) Theoretical Studies in Islamic Banking and Finance (Houston, Tx:
The Institute of Research Islamic Studies), in The Journal of King Abdul Aziz
University: Islamic Economics, pp.51-79.
Noonan, John T. Jr. (1957), The Scholastic Analysis of Usury (Cambridge, MA:
Harvard University Press).