Monday, 25 March 2013

Islamic Perspective On Riba


In the Name of Allah, the Most Gracious, the Most Merciful

Indeed all praise is due to Allah, we praise Him and seek His help and forgiveness, we seek refuge with Allah from our soul’s evil and our wrong doings, he whom Allah guides, no one can misguide, and he whom He misguides, no one can guide.

May the peace and blessings of Allah be upon Muhammad the Messenger of Allah and his family and Companions and all who follow them in righteousness until the Day of Judgment.

My Dear Brothers And sisters in Islam, riba is yet another major sin that has found its ways in the complex society we live in today.
Kindly spare 5-10 minutes of your precious worldly time to read this, share with a fellow brother or sister and the whole Muslim Umma, May the remembrance of the truth fill our hearts and may Allah Guide us all onto the right path through his Grace and Mercy. Amin

Allah the Almighty said: “That which you give as riba to increase the people’s wealth increases not with Allah, but that which you give in charity seeking the goodwill Of Allah multiplies manifold” [Al-Rum 30:39]

Riba (Interest, Usury is a very serious economic issue in the Islamic world, and not just the Islamic world but also Christianity and Judaism have all condemned riba.
We shall begin by defining the word riba, its difference from Trade, its restriction in the Quran, Hadith,Bible, the wisdom behind its prohibition and the various ways through which it can be avoided.

Riba definition

Riba is an Arabic noun derived from the verb Raba, meaning ‘to increase’ ‘to grow’ and ‘to exceed’.
Basically all the definitions relate to the concept of increase or surplus. The excess originates either in one thing itself or an increase in an exchange of commodities, services or sale of money.
Riba is also describes as  an increase or excess which in exchange or sales of a commodity or service accrues to the owner without giving in return any equivalent, counter or recompense to the other party. This clearly shows the two types or Riba namely Riba al Fadl and Riba al Nasiah which as defined also as follows.
Riba al Fadl: - excess accruing in sale or barter contract.
Riba al Nasiah:-excess accruing from a loan transaction in relation to time
Difference between riba and trade

  1. The  agreement between two parties(that is the buyer and the seller) is regulated by the concept of equality, the seller earns profit as a consideration for the time and cost he spends in purchasing the commodity for resale
There is no equality concept between the two parties. The creditor earns an excess over the loan which is the riba, but the debtor only gets the time to finance his business and the time does not necessary produce profit
  1. The seller acquires profit only once from the purchaser
The creditor continues to make the interest until the debtor pays back the loans
  1. A person earns the benefit only after offering his commodity or skills in serving the other party
A person lends out his money to another party without facing any hardship or offering his skills, he earns an income which is riba
  1. The transactions between the two parties come to an end when the commodities are exchanged for a price. The buyer does not pay any price after the end of the transaction.
The debtor uses the loan he acquires from a creditor and has to pay back the same amount with an additional amount which is the riba.

Prohibition of riba in the Quran

Allah has clearly mention the prohibition of riba in the Qur’an as clearly shown in the following verses and this will be sufficient for those with clear faith in Allah and his Messenger.
  1. “…Allah has permitted trade and has forbidden riba” [Al-Baqarah 2:275]

  1. “O believers take not doubled and redouble riba, and fear Allah so that you may prosper. Fear the fire which has been prepared for those who reject faith. And obey Allah and the Prophet so that you may receive mercy” [Al-Imran 3:130-132]

  1. “Those who benefit from riba shall be raised like those who been driven to madness by the touch of the devil, this is because they say “trade is like riba” while Allah has permitted trade and forbidden riba. Hence those who have received the admonition from their lord and desist, may have what has already passed ” [Al-Baqarah 2:275]

Prohibition of riba in the Hadith

1.    In Riyadh-us-Saliheen, hadith no 1615 as reported by prominent Sheikh (Muslim), Abdullahi bi n Mas’ud (RA) reported “The Messenger of Allah, peace be upon him, cursed the one who accepts riba and the one who pays it" the narration  in At-Tirmidhi adds “And the one who records it, and the two persons who stand witness to it”

2.     In Ibn-Majah Volume 3 Hadith no 2274, it was narrated from Abu Hurairah that the Messenger of Allah said: "There are seventy degrees of usury, the least of which is equivalent to a man having intercourse with mother”

Prohibition of riba in the Bible

1.     Thou shall not lend upon usury to thy brother, usury of money, usury of victuals, usury of anything that is lent upon usury.[Deuteronomy 23:19]
2.     “I consulted with myself and contended with the nobles and the rulers and said to them“ you are exacting usury, each from his brother!” therefore, u held a great assembly against them”[Nehemiah 5:7, new American standard bible]

The wisdom behind its Prohibition

Some of the wisdom behind the prohibition of riba are as follows:
  1. Riba is sure gain without the possibility of loss hence all the risk is taken by the borrower, rather than sharing the risk and the profit with both parties
  2. Riba creates a monopoly in society where the rich are rewarded for being wealthy while those who are not are forced to pay extra
  3. Riba conflicts with the spirit of brotherhood and sympathy
  4. Riba is one the major contributors towards inflation
  5. Riba causes trauma and depression due to mounting debts
Whole nations, dozens of them large and small have foreign debts so large that their riba payments on these debts are a crushing burden on the entire country, debt kills as some 11 million die each year around the world due to conditions of poverty and debt.
Former president of Nigeria Olusegun Obasanjo commented on the debt Nigeria faces as follows
“All that we have borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion, that $28 billion came about because of the injustice of in the foreign creditors (lender) interest rates”
“If you ask me what the worst thing in the world is, I will say it is compound interest”
-Jubilee 2000 news update, August 2000

During the global financial crises in 2008 and 2009, the daily Vatican newspaper, L’Osservatore Romano, reported the Vatican as saying that the Islamic finance system may help western banks in the crises as an alternative, The Vatican advices as follows: “the ethical principles on which Islamic finance is based may bring banks close to their clients and to the true spirit which should mark every financial service”

So it is clear from the above that where a riba based market fails, Islamic financial institutions do not suffer the same consequences since the risk is shared by both parties, lenders will be more careful as they also share the risk of losing money if the borrower cannot pay back the original sum.

So therefore given all the problems that riba creates, it is no wonder Islam prohibits such a detestable act.

Various ways of avoiding riba

Living in a capitalist society makes it difficult to completely avoid riba, this however should not be used as an excuse to freely indulge in it, and the following are some ways through which we can avoid riba.
  1.   To steer clear of this evil by not taking loan which involve paying riba.
  2. Open up a riba free bank account.
  3. Not entering into contracts which stipulate riba penalties.
  4. Making bill payments on time so as not to incur a late penalty.
  5. Borrowing money from sources that do not make interest payments a condition.
  6. Dealing with islamically compliant bank /institutions.
  7. Renting  a property/ service if you cannot afford to buy one without riba loans
  8. Accepting/organizing a “goodly loan”( al-qadr al-hasanah) which is a loan by man of which one intends to show kindness to another, which does not involve riba

With regard to the interest that the bank has given you, do not return no consume it but rather spend it on charitable causes such as giving to the poor or orphanage but however, do not expect reward for this.

Remember also brothers and sisters that most effective way of avoiding riba and determining which transactions are permissible in our present complex society is to consistently consult the Islamic scholars and utilizing their knowledge and guidance with proof of the truth.

Riba is no doubt haram, a major sin and no disobedience to Allah is worth the risk of his punishment, we must remember that the life of this world is short and fleeting as related in the following verse.“That which is on earth we have made but for a glittering show for it in order that we may test them as to which of them are best in conduct” [An-Kahf 18:7]

The purpose of our existence is not to lust after beauty or wealth, but rather to worship Allah correctly and live by his rules “The only saying of the faithful believers when they are called to Allah and his messenger to judge between them, is that they say “we hear and we obey” and such are the successful” [An-Nur 24:51]

Just because riba is wide spread and common does not make it permissible, and also remember that Allah said “And whosoever fears Allah and keeps his duty to Him, He will make a way for him to get out (from every difficulty) and will provide him sustenance from where he never imagined, And whosoever put his trust in Allah, Allah is sufficient for him” [At-Talaq 65:2-3]

May Allah make it easy for us to live as Muslim according the Qur’an and Sunnah of Prophet Muhammad peace be upon him and may we not be among the people that are stated in the verse below, Amin.

"Deaf, dumb, and blind, they will not return (to the path)" [Baqra 2:18]

Kindly note that any mistake in the contents of this article is due to my imperfection as a human being as only Allah Subhanahu Wa-Ta'ala is perfect in all affairs.
May Allah Forgive us our sins, guide us right from the evil of insincere intention, save us from misguided knowledge and grant the entire ummah benefit from this work AMIN.
Kindly feel free to make comments, contributions or corrections where necessary.
May Allah Bless us all, AMIN

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