Month: June 2017

The prohibition of interest (a.k.a usury/riba) is a central concept of Shariah (Islamic Law) that has been agreed upon by the scholars of the religion since the birth of the religion in the 6th century.

Below are some of the references from the origional sources of legistlation in Islam, namely the Quran (Muslim’s holy book) and the Hadith (the tradition of the Prophet of Islam Muhammad, may the peace and blessing of the All Mighty be upon him).

Quran

Chapter 2:

Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.

Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.

Indeed, those who believe and do righteous deeds and establish prayer and give zakah will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve.

O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.

And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.

And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, then it is better for you, if you only knew. (Quran 2:275-280)

Chapter 3:

O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful. (Quran 3:129)

Chapter 4:

And [for] their taking of usury while they had been forbidden from it, and their consuming of the people’s wealth unjustly. And we have prepared for the disbelievers among them a painful punishment. (Quran 4:161)

Chapter 30:

And whatever you give for interest to increase within the wealth of people will not increase with Allah . But what you give in zakah, desiring the countenance of Allah – those are the multipliers. (Quran 30:39)

Hadith:

From Jabir : The Prophet, peace be upon him (pbuh) said: “May they be cursed, the receiver and the payer of interest, the one who records it and the two witnesses to the transaction. They are all alike [in guilt].” (From the Compilations of Muslim, Tirmidhi, and Musnad Ahmad)

Jabir ibn ‘Abdallah , giving a report on the Prophet’s Farewell Pilgrimage, said: The Prophet (pbuh) addressed people and said “All of the riba of Jahiliyyah is annulled. The first riba that I annul is our riba, that accruing to ‘Abbas ibn ‘Abd al-Muttalib [the Prophet’s uncle]; it is being cancelled completely.” (Muslim and Musnad Ahmad)

From Abu Hurayrah : The Prophet (pbuh) said: “There will certainly come a time for mankind when everyone will take riba and if he does not do so, its dust will reach him.” (Abu Dawud and Ibn Majah)

 

When discussing the subject of “interest free economic systems” it is important to properly define what is meant by “interest” which is sometimes interchangeably used with the word “usury”.

According to the Merriam-Webster dictionary, interest is defined as a charge for borrowed money generally a percentage of the amount borrowed, or as the excess above what is due or expected. Usury is likewise defined as interest in excess of a legal rate charged to a borrower for the use of money.

It is interesting to note that legally speaking, some governments stipulate a criminal rate of interest, in excess of which debtors are not allowed to charge borrowers. In Canada for example, section 347 of the criminal code defines an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 60% on the credit advanced under an agreement or arrangement to be criminal.

So, although many now define usury as excessive or abusive interest rates charged in debt transactions on loans, historically in Christian societies and still in many Islamic societies today, charging any interest at all would be considered usury.

The word used for interest in Islam is called “ribaa” (which we use interchangeably). Linguistically, the word means excess. From an Islamic legal perspective, the word ribaa generally has two meanings, one that is specific and the other more general.

The general definition of ribaa in Islam is:

• all excess in monies (or time) in debt based transactions,
• or illegal sale based transactions.

The more specific definition of ribaa is:

• Loan based ribaa: To the  early Arabs (those who lived around the time of the Prophet of Islam, Muhammad), this is known as ribaa al-nasi’ah, ribaa al-duyun, or ribaa al-jahiliya.
• Sales based ribaa: also knows as riba al-buyu’

Loan based ribaa or interest is simply every excess beyond lent out capital that is stipulated in a loan based transaction. Such excess is usually represented by a fixed or variable rate that is calculated based on the term of the outstanding loan. It is basically excess that is charged on monies that are lent over a period of time.

Loan based interest is clearly not permissible under Islamic law. It is important to note that the operative word in the definition of loan based interest is “stipulated”. If an excess amount is paid by the debtor to the creditor out of the debtor’s free will, when it is not stipulated in the loan contract, is not usually considered ribaa or interest.

Interest is therefore defined as the excessive charge on the use of funds due to the delayed payment feature within a loan contract.

Sale based ribaa on the other hand is related to exchange transactions of commodities of different quality grades. It involves the unequal exchange of an underlying commodity (e.g. wheat) due to the varying qualities of the commodity. This is a far less common form of ribaa, especially in our present day and age, given that most sale based transactions are marked-to-market, where direct exchange of the underlying commodities (of varying degrees of quality) is uncommon.

 

Islam, one of the world’s largest religions, is one of the most misunderstood unfortunately. A lot probably has to do with the fact that the religion started in the far away lands of Arabia. More recently however, the religion has been tainted by many violent groups that have used the name of the religion to wreak havoc in order to attain their own personal and corrupt objectives.

This is most unfortunate when it happens in the name of Islam or any other religion. The same has been done throughout the ages, where groups would claim to act on behalf of a specific religion to do God’s work!

Islam is one of the world’s three largest monotheistic religions (religions based on the concept of one God), the other two being Judaism as well as Christianity. By way of numbers, of followers Christianity (with it’s various denominations) ranks first , followed by Islam, and then Judaism.

The word Islam itself is an Arabic word, and it roughly means wholehearted self giving to Allah. Allah is the Arabic word for God.