Contemporary attitudes towards interest (Riba)
- :Dr. Abdulaziz Sachedina
Because the rulings inferred by earlier jurists were not strictly uniform, there now exists a variety of views regarding the permissibility of charging interest in the buying and selling of goods. Outside of precious metals there remain differences of opinion about the items that are liable to usury ordinances. Thus, for instance, should all business dealings in things of the same kind be considered capable of riba? The opinions vary according to the documentation used to deduce juridical decision. Some argue that interest is permitted if the transfer of ownership of goods capable of riba takes place immediately. This is also known as riba al-fadl (`immediate' credit), which occurs in a contract of sales when there is an increase in the terms of exchange themselves. The more strict Muslims limit riba to the exchange of goods of same kind in equal quantities in accordance with a tradition that says: `Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, each kind for each kind, in hand. He who increases or asks for an increase commits riba, alike whether he gives or takes.' In the case of loans, which occasioned the Qur`anic prohibition of interest in the first place, it is forbidden to make a condition that a larger quantity shall be returned without regard to the kind of article. This is known as riba al-nasi`a (`delayed' credit) which entails a fixed increase in the amount of money over a time period. This kind of riba is the main source of contention.
The law regarding interest in lending is formally more strict. Muslims are prohibited either from taking or paying interest. Much of the Islamic law of contract is aimed at enforcing this prohibition of usury and risk (maysir). Riba in a loan exists not only when one insists upon the repayment of larger quantity, but also if any advantage at all is demanded. Therefore, it can even be forbidden to draw up a bill of exchange (suftaja) because the vendor, who is regarded as the creditor, reaps the advantage of avoiding the cost of transport. To be sure, many merchants used bills of exchange in the Muslim middle ages. But they were always conscious that a direct breach of the prohibition of usury was a grave sin.
Remembering such strict interpretations, conscientious Muslims to this day therefore not infrequently refuse to take bank interest. It is accurate to say that riba has operated in a negative manner. The thrust of the debate over riba has centered on the definition of the term, and has included little by way of a positive construction of a viable alternative in the contemporary financial world. The oil boom changed the picture of money flow radically, and one urgent problem facing the Arab and Islamic world was how to utilize effectively the petrodollars without openly flouting theShari`ah. The question of riba emerged again, but in a different context. For many concerned with its prohibition, the premise was that riba simply meant interest, and loans for interest could consequently not be accepted. Still, the importance of riba-based commerce and its requirement to charge interest have given rise to a number of methods to evade the prohibition. Some Sunni schools and the Shi`ites have recognized such methods of evasion in their discussion about the purpose of divinely ordained restrictions. In applied jurisprudence, these methods are not seen as contrary to the strict enforcement of the prohibition. Legal interpreters argue that two firm principles-"Necessity overrides prohibition" and "No harm and harrassment in Islam"-provide a reason to take into consideration the situational aspects (mawdu`at) of the original prohibition, to the extent that these two principles reflect the effective causes (`ilal) and inner significance (maqasid) of the Qur`anic ordinance. For example, if the categorical prohibition of interest has an adverse impact upon those who are manipulated in society, it may fail the test imposed by "Necessity overrides prohibition"; if one manoeuvers carefully to make interest fall within the acceptable limits , it may meet the test required by the rule "No harm and no harrassment." The case of deferred sales (buyu` al-`ajal) presses this line of interpretation farther. Where the delivery of the item or the payment of its price is deferred to a later date, there is no certainty nor even a strong probability that such a sale would lead to evil. Hence, if A sells his car to B for $10,000 with the price being payable in six months' time, and then A buys the same car for $8,000 from B with the price being payable immediately, this transaction in fact amounts to a loan of $8,000 to B on which he pays an interest of $2,000 after six months. From a legal viewpoint, there is a strong probability that this sale would lead to riba although there remains enough uncertainty that some jurists have regarded this type of transaction to be valid and legally binding. The uncertainty concerns whether the arrangement is actually exploitative. For if two businessmen have agreed, then it might be legitimate for the one who is to profit by the consequences of the present deal to be bound to share his profit in a complementary future deal.
Still, more strict jurists continue to regard any loan contract specifying a fixed return to the lender as immoral and illegal, regardless of the purpose for which a loan is sought, its amount and, or the prevailing institutional framework. The reason is that a distinction made in the loan operation by those who justify this operation, between the money on which the contract is made and the operation of lending itself is actually money rewarding money,which is unacceptable under the Shari`ah. This vocal minority in juridical opinion takes the Qur`anic prohibition as categorical, and hence, not open to any further debate or discussion. There is little doubt that in the case cited for this study, Mr. Kamaluddin's religious tenets were governed by the directives received from the latter group of scholars.
In general, it is safe to assume that majority of the Muslim businesses have come to recognize a fait accompli in dealing with interest-based transactions. Devout Muslims may remain hesitant to invest their money in the international stock market, but continue to avail themselves of modern banking with its religiously questionable practice of charging or paying interest. Most businesspeople simply consent to the western model as long as the financial institution happens to be non-Muslim. And some jurists regard banking with interest permissible, as long as, a person does not negotiate the interest and the bank is non-Muslim. Others seek to justify such excusatory thinking. Some leading Sunni jurists in Egypt defend their positive rulings on bank interest by regarding the modern bank interest as something different than the riba (usury) forbidden in the Qur`an. Their judgment rests on the ordinary lexical meaning of the term riba, which literally and simply means "increase" (ziyadah). They argue that since not every increase or profit is unlawful in theShari`ah, the Qur`anic text remains open to further extrapolation as to what type of increase God intends to forbid. Another tactic is used by Islamic banking institutions in many countries, including traditionally Muslim countries likeAlgeria and United Arab Emirates. They maintain their economic viability by describing themselves using the Islamic legal concept of "partnership for profit and loss" (mudaraba). There are basically three parties to the "partnership": the depositor (mudarib), the entrepreneur-investor (mudarab) or agent (`amil) and the bank which is intermediary between the depositer and the entrepreneur, as well as the agent of the owner of capital deposited in its safes. In this form of organization, all the parites to the mudaraba share in the profit and losses of the enterprises.
Despite efforts to evade it, the prohibition of interest remains a key element in the Islamic vision of a socially responsible economy, and an important element in Islamic business practice. In the last few decades of the twentieth century, according to a report by the Institute of Islamic Banking and Insurance, as many as 150 Islamic banking institutions manage $100 billion in the Muslim countries and abroad. There is a huge market demand for religiously guided investing among Muslims. Committees of Muslim jurists are consulted to decide what companies are Qur'an-safe (i.e., for example, do not sell alcohol, pork products, tobacco or charge interest on loans) for investment. Interest in Islamic investment is growing, with international stock markets launching their own Islamic market index to track Qur'an-safe stocks. The influence of Islamic ethics extends further. Besides ruling out certain items as forbidden, the Shari'a (Muslim religious law) also governs how much debt a company can carry and how much it can earn from interest. From the Islamic perspective, with its bias towards fair distribution of wealth and social justice, the Qur'an's strictures against riba remains at the heart of the Muslim individual as well as national financial institutions in international economic activity.
The prohibition of interest may become an important benchmark of justice in international political economy. As the world economies move closer to integration there is a growing consensus in the international community to move towards a more or less transcultural framework of ethical principles and rules. What is needed is a meta-ethics, a way for the different cultures and religions of the world to interpret their norms and practices to each other. From a normative Islamic point of view, the aim of this dialogical mode should be to engage theologians, scholars and policy makers in the world economic system to search for better ways of redestributing wealth and preserving social justice across nations. This normative focus clearly is evident in Islamic jurisprudence regarding the charging or paying of interest. When the Qur'an banned transactions involving interest, the purpose was to protect financially weak in one way or another against the wealthy who might take advantage of them. The attitude which dominated Islamic jurists was fear of arbitrariness in the decisions of those who held financial and political power. It is an appropriate attitude today.
The Islamic position is an important contribution to international business ethics, for it is supported by a general cross-cultural moral belief that the poor ought to be protected as well as a specific revelation within Islam that regards interest as a form of disregard for the downtrodden in society. All cultures share certain moral principles like beneficence or nonmaleficence. All require rules like truthfulness in advertising as an essential element in regulating morally responsible merchant-consumer relationship. The Islamic prohibition of interest therefore seems to be an extension of the ethical requirement that human beings must treat each other fairly, rather than an obstruction to commerce.
Adapted from the book: "The Issue of Riba in Islamic Faith and Law" by: "Dr. Abdulaziz Sachedina"
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