SUGARCOATING THE RIBA

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NOTE: This article is simply about riba in general and doesn’t aim at any specific banking system. Interest also happens a lot in our normal business transactions and initiatives and sometimes we (the clients) are ignorant or unaware about it.

Something interesting always comes up when Muslims start talking about riba/interest/usury-related transactions.Just like we try to ‘halalisize’ (if there is any word like that) many other haraam things in our lives, riba is one of them. We never call a spade a spade simply because hey! who wants to be lectured about interest? So we’d rather call it profit, call it a gift, a reward yet as much as we sugarcoat it, it doesn’t change the fact that it is indeed riba.

The word “Riba”, in Arabic language, literally means an “increment’ or addition”. In Islamic Fiqh the term riba has a special meaning. Riba is an unjustified increment in borrowing or lending money, paid in kind or in money above the amount of loan, as a condition imposed by the lender or voluntarily by the borrower. Riba defined in this way is called in Fiqhriba al-duyun (debt usury). Riba also is an unjustified increment gained by the seller or the buyer if they exchanged goods of the same kind in different quantities. This is called “riba al-fadl” or “riba-al-buyu” (trade usury).

So there are basically two types of riba:

The first and primary type is called Riba An Nasiyah or Riba Al Jahiliya. It is defined as excess, which results from predetermined interest (sood) which a lender receives over and above the principle (Ras ulMaal)
Imam Abu Bakr Hassan Razi has outlined definition of Riba An Nasiyah in the following words: “That kind of loan where specified repayment period and an amount in excess of capital is pre determined.”.
One of the hadith quoted by Ali Ibn Talib (RAA) has defined Riba An Nasiyah in similar words. The Holy Prophet said:”Every loan that draws excess is Riba.”

The famous Sahabi Fazala Bin Obaid has also defined Riba in similar words: “Every loan that draws profit is one of the forms of Riba.”.

The second type is called: Riba Al Fadl. It is defined as excess compensation without any consideration resulting from a sale of goods.

Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous commodities and encountered in their hand-to-hand purchase & sale as explained in the famous hadith: The Prophet said, “Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell dates in exchange of equivalent dates, sell wheat- in exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person transacts in excess, it will be usury (Riba). However, sell gold for silver anyway you please on the condition it is hand-to-hand (spot) and sell barley for date anyway you please on the condition it is hand-to-hand (spot)”.

It has clearly been stated in both the qur’an (several ayas) and hadith on prohibiting riba in all manner:
“That they took riba, though they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment”
(Qur’an 4:161)

“Those who charge riba are in the same position as those controlled by the devil’s influence. This is because they claim that riba is the same as commerce. However, God permits commerce, and prohibits riba. Thus, whoever heeds this commandment from his Lord, and refrains from riba, he may keep his past earnings, and his judgment rests with God. As for those who persist in riba, they incur Hell, wherein they abide forever”
(Qur’an 2:275)

“Allah condemns riba, and blesses charities. Allah dislikes every disbeliever, guilty. Lo! those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve. O you who believe, you shall observe God and refrain from all kinds of riba, if you are believers. If you do not, then expect a war from God and His messenger. But if you repent, you may keep your capitals, without inflicting injustice, or incurring injustice. If the debtor is unable to pay, wait for a better time. If you give up the loan as a charity, it would be better for you, if you only knew.”
(Qur’an 2:276-280)

Jabir said that Allah’s Messenger (may peace be upon him) cursed the accepter of usury and its payer, and one who records it, and the two witnesses, and he said: They are all equal”
(Sahih Muslim)

“It is reported on the authority of Abu Huraira that the Messenger of Allah (may peace be upon him) observed: Avoid the seven noxious things. It was said (by the hearers): What are they, Messenger of Allah? He (the Holy Prophet) replied: Associating anything with Allah, magic, killing of one whom God has declared inviolate without a just cause, consuming the property of an orphan, and consuming of usury, turning back when the army advances, and slandering chaste women who are believers, but unwary.
(Sahih Muslim)

Now if we were to illustrate Conventional banking to Islamic banking this is how the cycle goes:

In as much as we have the interest-free Islamic banking methods, Muslims still opt for the tempting money rather than their akhera. There is a certain product usually offered in banks that is called a fixed deposit which is one of the most common accounts. With the help of a Muslim banker I got comprehend this:
There are various interest earning accounts in banks today, the most common ones are:-
• Savings account
• Call deposit account
• Fixed deposit account

Savings Account: – This one of the most common banks’ product. It is an account where you can deposit any amount of money but the withdrawals are limited for the sole purpose of making the customer save money for his own benefit. This is an interest earning account where the larger the sum of money in your account the more interest one earns but at a lower interest rate. It has no maturity date meaning you can withdraw any time you feel like it.

Call Deposit: – This is one of the not so popular type of an account offered by commercial banks (not Islamic banks). In this account, the customer enjoys instant access to his/her money and unlimited withdrawals and deposits. The call deposit client also enjoys benefits of a savings account through accrual of interest (cumulated interest of previous months). The difference between Call deposit account and savings account is that Call deposit account has a fair interest rate than a savings account. Some commercial banks offer call deposit with a maturity rate but monthly wise and not annually.

Fixed Deposit: –This is one of the most popular interest earning account offered by all types of banks. A Fixed deposit account is an account where a client deposits a certain amount of money as the principal amount with a maturity rate which is annually. The maturity period is where a client is allowed to withdraw the amount he/she had deposited initially or the whole amount in the account and close it. Here, the higher the deposit the better the interest rate and the higher the interest earnings. For Fixed deposit, you can withdraw the interest only either after 3 months, 6 months or just collect the lump sum annually.

As human beings, we often have lust for money. We seek it. We yearn for it. But then what is worse than lying to yourself that you are doing nothing wrong yet you know it is?
So here is a Muslim who has always been depositing in his fixed account which he receives interest after some months. The argument someone may bring is that, the money he deposited was used to do some kind of business which brought in profit which in turn he is given too. But then comes these three basic rules of fiqh which we need to understand:

Fiqh rules on prohibition of riba:
To emphasize interest or riba prohibition, reference should be made to three Fiqh rules:
a) A benefit gained from a loan is riba. A rule which is based on the ethics of Qard Al-Hassan (Benevolent or good loan) in Quran and on Hadith of the Prophet (p.b.u.h.) “the only reward for a loan is the thanks giving and the repayment”.
b) Which means that the capital owner has to choose either a “return” on his capital by sharing with its user in profit, or a “guarantee” to repay his capital intact. A “return” and “guarantee” on capital can not be combined together in one deal.
c) Which means that the capital owner will be entitled to “Profit” only if he is ready to accept “loss” if this happened. These rules are the basis of all profit and loss sharing financing methods in Islam, and they leave no doubt that interest paid to bank depositors above their money, or interest paid by borrowers from banks for the use of banks’ money is riba.
In this case, this Muslim is only getting ‘profit’ which is in fact riba. How? Because if the bank got a loss they don’t also share the loss with the investor.

Why is Riba prohibited?
1. Usurers are generally miser, selfish and hard-hearted Shylocks, devoid of milk of human kindness, who exploit the misery of the poor and charge their pound of flesh without feeling any moral compunction for the sufferings of the borrowers.
2. Interest breeds idleness and promotes unearned income. Instead of undertaking business ventures and using their business acumen, skill, knowledge and entrepreneurship, people having money start lending it on interest and thus living like parasites.
3. Interest causes many economic evils as well. It leads to hoarding of money adversely effecting its circulation among larger sections of society. It also causes establishment of monopolies, cartels and concentration of wealth in few hands. Thus distribution of wealth in the community becomes uneven and gulf between the rich and the poor widens.
4. Interest charged on international loans has aggravated debt-servicing problem of the debtor countries. It has not only impeded the economic development of the poor nations, but has also resulted into transfer of resources from the poor to the rich nations.
5. Capital investment is withheld from those enterprises which cannot yield profit equal to the prevailing rate of interest, even though such projects may be very vital for the country and nation. The flow of all financial resources in the country turns in the direction of those enterprises which carry the prospect of a profit margin equal to or more than the current rate of interest, even though such enterprises may have little or no social value.
With the revolutions and adverse changes in our world, we as Muslims need to be very keen, aware and careful on how we invest, where we invest, where we borrow and how is our money cycle. When you are told this is just profit make sure you investigate further, what kind of ‘profit’ they are talking about. Let us all be steadfast and exemplary in following our deen.

May Allah guide us. Ameen.

REFERENCES:
1. http://www.islamic-banking.com/iarticles_8.aspx
2. http://www.soundvision.com/article/5-ways-to-deal-with-the-dilemma-of-riba
3. http://www.aims.education/study-online/riba-in-islamic-banking-and-finance/

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