Prohibiting Riba

Transcription

1. RATIONALE OF PROHIBITING RIBA Before discussing the reasons for prohibiting riba by the Quran and Prophet 's Suhnah it is pertinent to explain what Islam is. Literally Islam means human submission to the Divine Will, and as a religion Islam connotes higher values and moral principles, such as justice, equality, freedom and brotherhood of human beings. It is in fact a source of inspiration for mankind for a true and positive moral conduct. Islam caters for human welfare through providing harmony of moral, material and spiritual needs of human beings. The basic moral principles and normative values of Islam are contained in the Holy Quran and in the teachings of Prophet Muhammad (Peace be upon him). Besides stressing the unity and sovereignty of God1 which ^Quran, 112: 1-4. (Note: English translation of the Quranic verses have been taken from Holy Quran with English translation by Marmaduke Pickthal! and Urdu translation by Mawlana Fateh Mohammed Jallendhri).
2. 7 is called the essence of the Quran , it provides guidance2 for success or well-being.3 It is essential for a true Muslim to believe fully in the principles and values of the Holy Quran4 5 which are stipulated to be - <> 6 authentic. ADVENT OF ISLAM AND ITS AIMS: Islam arose as an egalitarian reform movement under the Prophet Muhammad (Peace be upon him) to eradicate the socio-economic injustice then prevailing in the Arab society in the early decades of the seventh century A.C. The society was riven with social and economic injustice, inequality, moral decadence and religious degeneration. It was because of these conditions, that this pre-Islamic period was called an age of ignorance and darkness, when the powerful oppressed and exploited the weak. In this unequal society people and tribes had come to be divided into two broad social groups: oppressors and the oppressed. The Quran explicitly refers to these groups in the following verses: 2 Quran, 2:2. 3 Quran, 2:5. 4 Quran, 2:41. 5 Quran, 2:23. -
3. 8 "How should ye not fight for the cause of Allah and of the feeble among men and of the women and their children who are crying; Our Lord I Bring us forth from out this town of which the people are oppressors! Oh, give us from Thy Presence some protecting friend! Oh, give us from Thy Presence some defender!"6 The oppressors were the rich slave-owners, merchants, land lords and tribal chiefs. The oppressed were servants, slaves, orphans, widows and workers who performed all the menial and laborious jobs without due compensation. The oppressors appropriated the wealth of the less privileged, poor, needy and the weak through usury7 8 and defrauding.6 Another important group vacillating between the oppressors and the oppressed was that of hypocrites who are severely condemned by God.9 10 They were benefiting from their opportunistic alliance with both the groups.’0 The rich oppressors dominated a regime of unequal exchanges, usury, exploitation and fraud in which force was employed to deprive the poor, less privileged and the weak of their legitimate 6 Quranf 4:75. 7 8 Quranf 4:161. Quran, 83:1- 9 3.Quran, 4:145. 10 Quran, 4:143.
4. 9 shares , due rewards, fair wages and compensations.11 12 Islam thus arose as a reform movement to bring justice and equality in these socioeconomic relations and to abolish all such activities which verged on injustice, inequality, exploitation and were declared haram or illicit. Social and economic disorder takes its roots from extremes of social and economic inequalities which are inconsistent with the divine law of (Adf), Justice. The Quran refers to this crucial problem of justice in the following verses. *^ " Allah enjoyneth justice and kindness, and giving to kinsfolk, and forbiddeth lewdness and abomination and wickedness. He exhorteth you in order chat ye may take heed.1,12 In fact, justice is the fundamental principle, the essential base on which the edifice of an Islamic society is raised. This is opposed to oppression and injustice. In the pre-Islamic society of Arabia riba was the worst form of exploitation and, as such, was strictly prohibited by the economic ethics ^Haque, Ziaul, in his paper: "The Nature and Significance of the Medieval and Modern Interpretations of Riba", discusses the outlines of the origin and development of the problem of riba in the context of a regime of unequal exchanges, pp. (4-10) 12 Quran, 1 6:90.
5. 10 of Islam . PROHIBITION OF RIBA IN TH&QURAN: The following are the main verses of the Quran which are the basis of the Islamic doctrine of tf/fta-prohibition.13 "Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say; trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (inobedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Allah. As for him who returneth (to usury) - such are rightful owners of the Fire. They will abide therein",14 "Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and guilty".15 * "0 ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) believers."10 13 ln the English translations of the Quran, riba is generally translated as usury. This fact must be borne in mind in order to avoid confusion. 14 Quran, 2:275. 15 Quran, 2:276. 10 Quran, 2:278.
6. 11 "And if ye do not, then be warned of War (against you) from Allah and His Messenger. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged."17 18 "And if the debtor is in straitened circumstances, then (let there be) postponement to (the time of) ease; and that ye remit the debt as almsgiving would be better for you if ye did but know".10 "O ye who believel Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful".19 "And of their taking usury when they were forbidden it, and of their devouring people's wealth by false pretences. We have prepared for those of them who disbelieve a painful doom".20 "That which ye give in usury in order that it may increase on (other) people's property hath no increase with Allah, but that which ye give in charity seeking Allah's countenance, hath increase manifold".21 17 Quran, 18 2:279. Quran, 19 2:280. Quran, 20 3:130. Quran, 21 4:161. Quran, 30:39.
7. 12 ANALYSIS AND CHRONOLOGY OF RIBA VERSES22 The prohibition of Riba is contained in the Quran in four different verses as given above . i) The first of these (30:39 - Al-Rurn) were revealed in Mecca and emphasised that while riba deprived wealth of God's blessings, charity raised it manifold. It means that riba and charity (Sadaqa) are two opposite concepts. ii) The second revelation (4:161 - Al Nisa) in early Madinah period condemned usury and misappropriation of others' wealth and threatened both (classes of exploiters) severe punishment from God. This verse also refers to previous verses on usury, It shows that riba, defrauding and exploitation are severely condemned. iii) The third revelation (3:130 - Al Imran), came around the 3rd year of Hijrah. The verses here indicate how riba was multiplied and charged exorbitantly. Muslims are told to 22 The chronology of revelations is based on the prologue of the respective surahs in Al-Quran with English translation by Marmaduke Pickthall, and Urdu translation by Mawlana Fateh Muhammad Jallendhri.
8. 13 keep away from riba if they desire their own success (welfare). This means that riba was a deep-rooted practice in the economic transactions and was a great source of injustice and thus its elimination was imperative for welfare of the oppressed human beings iv) The fourth revelation (2:275-6, 2:278-80). The period of revelation are the years 1 and 2 A.H., for the most part, certain verses of legislation being considered as of later date. The verses (275,276) suggest that Trading (bay') is lawful (halal) and riba is forbidden (haram). The verses do not define riba and bay', but |i I merely describe them with a grim warning to the money lenders who justify riba as a form of bay'. Allah has denounced the people who live upon riba and these are the people of Hell. Allah condemns usury and blesses almsgiving {sadaqat). Here it is evident that as revealed in J| (3:130) and discussed above Sadaqat and Zakat are contrary to riba and as such conducive to establishment of an egalitarian economic system, i.e. collective cooperation and mutual social solidarity by abolishing exploitation of man by man. 'If ; 'll -ii' I! I ,'i i il l J ll The verses (278,279 and 280) urge upon the Muslims that they must
9. 14 give up what remains of their riba earnings , and if they desist then they are warned of war from Allah and His Messenger. Further, if the lenders agree and submit to divine command they should only have their principal amount back without interest, and if the debtor is not in a position to repay, then the lenders must postpone the recovery, and if they remit the loan it is better. The verse (2:279) - "Then ye have your principal (without interest)", clearly defines riba as an increase of a principal sum charged in loans. It is now pertinent to define riba in the literal and legal senses. LITERAL MEANING OF RIBA | ■i -& "Riba literally means increase, addition, expansion or growth".23 It is however, not every increase, addition, expansion or growth which has been prohibited by Islam. One has to evaluate the context in which something is referred to and then comprehend the essence. Quran is a Holy book in which rationality plays a big part. The term riba must, therefore, be construed in the broad sense of an unequal exchange I* 23 i| .i *l Chapra, M. Umer (1985), p.56.
10. 15 which also includes lending on interest or usury , riba in the context of exchange would therefore occur either in a thing, commodity or money without giving in return, equal/just counter-value to the other party (debtor), thereby creating exploitative relationship. In the terminology of Shariah, riba is, however, used in two senses: riba •^ al-nasi'ah and riba ai-fadi.24 Riba A!-Nasi'ah: Riba al-nasi'ah refers to interest on loans. The Quranic verses (2:273)- Mthen Ye have your principal (without interest)” clearly defines riba al-nasi'ah as an increase of a principal sum charged in loans. All schools of Muslim jurisprudence therefore rightly interpret bank-interest as riba al-nasi'ah, which is prohibited and haram. Riba Ai-fadi: The Prophetic Ahadith (Traditions) particularly discuss the nature of riba al-fadl. These Traditions are, besides the riba verses of the Quran, the 2A ibid, p. 57.
11. - X * 16 other source for studying riba. The most famous riba-Hadith has been related by Abu Said al-Khudri which says that if gold, silver, wheat, barley, dates and salt are exchanged against each other, for example, wheat against wheat, they should be exchanged from hand to hand, on the spot, and be equal and similar.25 Although there is disagreement among Jurists as to whether the injunction applies only to the six commodities referred to above or whether there is some general principle which emerges covering other aspects, it is evident that the prohibition of Riba ai-fad! is intended to ensure justice and remove all forms of exploitation through unfair exchanges. it, therefore, follows from the foregoing that the main rationale of prohibiting riba is on account of exploitation in lending or in exchange, when an equal return or countervalue is not given to the other party, whether seller/purchaser or a debtor. The present controversy over the definition and interpretation of riba in Pakistan (whether it is interest or usury), to a large extent reflects the 2 *lbid, p. 58.
12. 17 fact that the meaning of the concept of riba cannot be correctly understood without understanding its original social and economic context . We do not intend to redefine riba, but, for the purpose of this study, we shall try to interpret it in order to underline the essence of the subject matter in consonance with the teachings of the Quran and the Sunnab. INTERPRETATIONS OF RIBA IN PAKISTAN AND OTHER MUSLIM SOCIETIES: Some modernists, including Jaffer Shah Phulwarvi, Yaqoob Shah26 are of the opinion that the riba which is prohibited in the Holy Quran is that kind of riba which was prevalent among the Arabs at the time when these verses were revealed and since the commercial loans for productive purposes were not in practice at that time, the interest charged by modern banks for commercial purposes does not come within the ambit of riba, prohibited by Quran. These modernists, it appears, overlook the fact that Islam is the last religion; and, as the Muslims believe there shall be no other prophet or revelation for all times to come, how can then God in His all Wisdom 20 20 Federal Shariat Court Judgment on Interest (Riba), p. 73.
13. 18 reveal guidance for a particular time period only . Late Dr. Fazlur Rehman offered another interpretation of riba.27 He defined riba as "an exorbitant increment whereby the capital sum is doubled several-fold against a fixed extension of the term of payment of the debt". He based this conclusion on the Quranic verse (3:130) "Oye who believe, devour not usury doubling and quadrupling (the sum lent)". Concluding his article he states that "abolition of interest in the present state of our economic development would be a cardinal error."29 Objection can be raised against this interpretation of riba by Dr. Rahman. He in fact does not explain the meaning and significance of the Quranic Verses (2:279) - "Then Ye have your principal (without interest)" which clearly implies that there should not be any increase over the principal. The question of simple or compound interest does not arise. The system of riba as a whole is condemned. Dr. Rehman, it appears interpreted riba as usury basing his argument on the Quran verse (3:130). 2/ Rahman, Fazlur, (1964), p. 40. 2Q/bid, p. 40.
14. 19 It is interesting to note that in 1987 , an Egyptian court ruled that bank interest was legal.29 Many scholars have identified riba with usury (exorbitant rate of interest). Aurberry, Muhammad Marrnduke Pickthal, Muhammad Asad and Abdullah Yusuf Ali, all explain that riba is usury.30 It appears that these scholars take the Quranic verse (3:130) to mean usury only. They do not interpret riba in its broader sense. The fact is that it is not the rate of interest which is prohibited but it is interest irrespective of rate which is prohibited. It is also a fact that Quranic verses are meant for all times and therefore their validity cannot be challenged in the present times or times to come. On the other hand some Ulama (religious scholars) and economists rightly interpret bank interest as riba al-nasi'ah. Mawlana Mawdudi defines interest as the excess over principal subject to time and fixity of - s> return. He says: 20 30 Please see Daily Recorder, Karachi: dated Monday, Jan. 1 9, 1 987. Kazmi, Aqdas Ali (1992), "Defining Riba", Daily Dawn, Karachi: Nov, 20.
15. 20 ( Therefore, interest will be defined as a surplus charge on any capital sum loaned against a certain time period with stipulation and fixity. Such a charge will be called sud or interest.")31 CONCLUSION: The Quranic prohibition of riba aims at eliminating exploitation and oppression, {Zulm)32 In disallowing interest and permitting profits Shariah has developed two specific forms of business arrangements: Mudarabah (profit-sharing) and musharakah (partnership) as means of earning profits without charging interest. If interest is forbidden for being an exploitative tool, much care needs to be exercised in ensuring that profit does not merely substitute interest and becomes a mal-distributor 31 Please see Federal Shariat Court's Judgment on Interest (Riba), p.63. 32 p.253. e Siddiqui/ Muhammad Nejatullah (1980), Studies in Islamic ' Economics,
16. 21 of resources and wealth thereby defeating the main objective of Islamising the economy . Ail this points out that since riba as a system is exploitative and as such the system to replace it should not have the inherent means of exploitation. It is pertinent to quote a Hadith, which brings out the real context in which riba was prohibited. Abu Umamah reported that the Holy Prophet (may peace be upon him) said "He who makes for his brother a recommendation and then (the latter) offers him a gift for it and he accepts that, enters into a big gate of riba".33 It can then be inferred that riba takes place in transactions/dealings, whenever a person or a group of people take undue advantage/benefit from other persons/group of people due to latter's inferior economic or social status, thereby giving rise to injustice and exploitation, which is in itself inconsistent with the divine law of Adi. It is not our intention to redefine riba but we have trh understand the significance of the problem as to why this was prohibited. This is important to build an economic system which is free from injustice and 3J Khan, Mohammad Akram (1989), p. 40.
17. 22 exploitation , and is based on the guidelines given by the Quran and the Sunnah. In the next chapter we shall discuss the Islamically admissible modes of financing in Pakistan with the historical perspective of non-interest banking and the measures taken by the Government in this regard. We shall also discuss the reasons why in the present policy of Islamising economy only nomenclature has been changed since no tangible efforts towards achieving the desired goals and objectives of Islamic Banking, have been made.
18. 23 REFERENCES 1 . Chapra, M. Umer (1985): 2. Federal Shariat Court (1992) Towards a Just Monetary The Islamic Foundation System "Judgement on interest (Riba)" P.L.D Publishers, Lahore 3, Haque, Ziaul (1993): "The Nature and Significance of of the Medieval and Modern Interpretations of Riba." Paper presented at the 9th Annual General Meeting of Pakistan Society of Development Economists on Jan. 8, 1993, Islamabad. 4. Khan, M. Abram (1989): Economic Teachings of Prophet Muhammad (PBUH): A select Anthology of Hadith Literature on Economics. International Institute of Islamic Economics, Islamabad. 5. Kazmi, Aqdas AN (1992): "Defining Riba" Friday feature in the Daily Dawn Nov. 20, 1992. 6, Pickthall, M. English Translation of Holy Quran (with Urdu Translation by Mawlana Fateh Mohammed Jallendhri), Lahore: Taj Co. Ltd. 7. Rahman, Fazlur (1964): "Riba and Interest” Islamic Studies. Journal of the Central Institute of Islamic Research, Karachi Vol. II (March 1964) No. 5. 8. Siddiqui, M. N. (1980) "Muslim Economic Thinking: A Survey of Contemporary Literature" in Studies in Islamic Economics, Islamic Foundation, U.K.