Riba & the Non-Muslim World

Is there any difference between a Muslim and a non- Muslim in the matter of prohibition of riba? Can the prohibition of riba be extended to the loans obtained from non-Muslim, or for that matter, from Muslim foreign countries whose laws and national policies, together with international monetary laws and policies, are not within the control of the state of Pakistan?

To the best of my knowledge and belief, the Shari‘ah docs not differentiate between a Muslim and non-Muslim in the matter of prohibition of riba. It had been a Jewish practice that interest or usury was forbidden amongst the Jews yet a Jew could charge interest from a “gentile”. The far- reaching consequence of this kind of duplicity and discrimination have been explored in an interesting study, The Idea of Usury: From Tribal Otherness to Universal Brotherhood. This type of discrimination is abhorrent to Islamic moral values. Islam regards interest as exploitative (zulm) and prohibits it amongst the Muslims as well as between Muslims and non-Muslims. In fact, Islam wants to build a just economic order for the well-being of all human beings: a new model for the mankind.

As far as the Islamic state is concerned, riba should be forbidden by law and as such would be a part of the public law, binding on all Muslims and non-Muslims, residents and non-residents, citizens and aliens, doing business within the Islamic state, or with the Islamic state. Even in Saudi Arabia today, all interest-based agreements including those between Saudis and foreigners are not enforceable through courts of law, as technically, interest is forbidden and this ban is part of the law of the land.

There cannot be any justification for interest in international monetary dealings only because interest is permitted in the legal system of other countries and states. The question of their monetary laws being or not being under the control of the State Bank of Pakistan is irrelevant because these dealings are voluntary and optional. However, I do not rule out circumstances in which a Muslim individual firm or state might find it totally unavoidable to deal with foreigners, individuals or corporate bodies, which refuse to deal on our terms and conditions and as such in such situations there can be certain cases where under the law of necessity for a certain specified transitional period, transactions of a certain character, despite the fact that they involve interest, may be condoned or tolerated but this has to be as an exception specifically provided for and also only under certain clearly indentified circumstances and subject to some specific conditions. Iztirar cannot be used as an excuse to open the floodgate of interest-based relations with the outside world. The whole question of international transactions, commercial as well as financial, has to be re-examined in great depth and with great sensitivity.

It may, however, be mentioned in passing that the FSC judgement on riba, which is presently under appeal, to the best of my knowledge and belief concentrates on the domestic economic issues, and the laws which have been affected by the judgement also are mainly concerned with the economy of the country and not with the problems of international financial transactions and capital movements.

The Government of Pakistan and some institutions under its control acquire loans by issuing bonds, certificates, etc. and pay a fixed period-wise profit to the holders of such securities. Does this profit fail within the definition of riba?

To the best of my knowledge and belief these bonds and certificates are riba-based and the use of the term profit in their context is a misnomer, in fact a misuse of the term.

Professor Khurshid Ahmad

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.